IN THE UNITED STATES DISTRICT COURT

FOR THE EASTERN DISTRICT OF PENNSYLVANIA

IN RE: AMERICAN INVESTORS :

LIFE INSURANCE CO. ANNUITY : MDL DOCKET NO. 1712

MARKETING AND SALES PRACTICES :

LITIGATION :

:

Relates to: :

:

GILMOUR v. BOHMUELLER, et al. :

CIVIL ACTION NO. 04-2535 :

:

TRIMBLE v. WEINSTEIN, et al. :

CIVIL ACTION NO. 05-2101 :

:

BRENNAN v. WEINSTEIN, et al. :

CIVIL ACTION NO. 05-3588 :

MEMORANDUM AND ORDER

Case 2:05-md-01712-MAM Document 207 Filed 08/30/07 Page 1 of 96
i

TABLE OF CONTENTS

I. Factual Background .................... 2

A. The Scheme...................... 3

B. The Defendants.................... 7

1. The Insurance Company Group. . . . . . . . . . . 8

2. The Sales Group................. 9

3. The Attorney Group.. . . . . . . . . . . . . . 10

C. The Plaintiffs and Their Individual Allegations.. . 10

1. Richard and Dena Stein.. . . . . . . . . . . . 10

2. Mary Lynch................... 12

3. Beryl and Charlotte Price. . . . . . . . . . . 14

4. John Healy................... 15

5. Jean Ryles................... 16

6. George Miller................. 17

7. Edward and Gloria Inferrera. . . . . . . . . . 18

8. Evelyn Edwards.. . . . . . . . . . . . . . . . 19

9. Jonathan Upchurch/Edith Newcomer.. . . . . . . 20

10. Walter and Suzanne Gilmour.. . . . . . . . . . 21

11. Harcourt Trimble, III/Harcourt and Barbara 

Trimble.................... 22

12. Margie Brennan Treitz/Gilbert and Joanne

Brennan.................... 24

Case 2:05-md-01712-MAM Document 207 Filed 08/30/07 Page 2 of 96
ii

II. Procedural History and Overview of the Claims. . . . . . 28

III. Analysis......................... 33

A. Defendants Dismissed for Failure to State Any Claim

..................... 34

B. RICO........................ 35

1. Claim Under Subsection 1962(c).. . . . . . . . 35

a. Existence of an Enterprise. . . . . . . . 36

(1) The Existence of an Ongoing

Organization.. . . . . . . . . . . . 37

(2) The Various Associates Functioned 

as a Continuing Unit.. . . . . . . . 41

(3) Existence Separate and Apart from

Alleged Racketeering Activity. . . . 43

b. Conduct or Participation. . . . . . . . . 45

c. Racketeering Activity.. . . . . . . . . . 49

(1) Scheme to Defraud. . . . . . . . . . 51

(2) Use of the Mails or Wires. . . . . . 55

(a) The Insurance Company Group 

Defendants. . . . . . . . . . . 57

(b) Bohmueller. . . . . . . . . . . 59

(c) Weinstein and Plaza.. . . . . . 61

(d) The Patriot Group.. . . . . . . 62

(3) Injury to Business or Property.. . . 63

2. Claim Under Subsection 1962(d).. . . . . . . . 67

3. Whether the McCarron-Ferguson Act Bars the

Plaintiffs’ RICO Claims. . . . . . . . . . . . 68

C. State Law Claims.................. 69

Case 2:05-md-01712-MAM Document 207 Filed 08/30/07 Page 3 of 96
iii

1. Statute of Limitations.. . . . . . . . . . . . 70

2. Breach of Fiduciary Duty.. . . . . . . . . . . 73

3. Negligent Supervision. . . . . . . . . . . . . 75

4. Unjust Enrichment. . . . . . . . . . . . . . . 76

5. Fraudulent Misrepresentation and Negligent

Misrepresentation. . . . . . . . . . . . . . . 79

6. Civil Conspiracy.. . . . . . . . . . . . . . . 81

7. Professional Negligence. . . . . . . . . . . . 81

8. Breach of Contract.. . . . . . . . . . . . . . 84

9. Violation of the Pennsylvania Unfair Trade

Practices and Consumer Protection Law. . . . . 86

10. Negligence Per Se. . . . . . . . . . . . . . . 87

11. An Accounting................. 88

Case 2:05-md-01712-MAM Document 207 Filed 08/30/07 Page 4 of 96
 IN THE UNITED STATES DISTRICT COURT

FOR THE EASTERN DISTRICT OF PENNSYLVANIA

IN RE: AMERICAN INVESTORS : MDL DOCKET NO. 1712

LIFE INSURANCE CO. ANNUITY :

MARKETING AND SALES PRACTICES :

LITIGATION :

:

Relates to: :

:

GILMOUR v. BOHMUELLER, et al. :

CIVIL ACTION NO. 04-2535 :

:

TRIMBLE v. WEINSTEIN, et al. :

CIVIL ACTION NO. 05-2101 :

:

BRENNAN v. WEINSTEIN, et al. :

CIVIL ACTION NO. 05-3588 :

MEMORANDUM AND ORDER

McLaughlin, J. August 29, 2007

In this multidistrict litigation, the plaintiffs have

sued several defendants for damages arising from an allegedly

fraudulent scheme to sell senior citizens unnecessary and

unsuitable estate planning instruments and annuities. According

to the plaintiffs, the defendants participated in this scheme

through their involvement in one of three groups: the “Insurance

Company Group,” the “Sales Group,” or the “Attorney Group.” The

plaintiffs seek damages and injunctive relief under the Racketeer

Influenced and Corrupt Organizations Act (“RICO”), 18 U.S.C. §

1961 et seq., as well as under various state law causes of

action. 

Case 2:05-md-01712-MAM Document 207 Filed 08/30/07 Page 5 of 96
 The full citations for the four lawsuits that are subject to 1

the instant motions are as follows: Stein v. AmerUs Group Co.,

No. 05-1712; Gilmour v. Bohmueller, No. 04-2535; Trimble v.

Weinstein, No. 05-2101; and Treitz v. Weinstein, No. 05-3588.

2

The defendants in the Stein consolidated class action,

as well as certain defendants in the Gilmour, Trimble, and Treitz

individual actions, have filed motions to dismiss. Also pending

in the Trimble individual action is a motion for judgment on the

pleadings. These motions all seek dismissal on the ground that 1

the plaintiffs have failed to state a claim. 

The Court will grant the motions to dismiss insofar as

they seek dismissal of all claims against defendants Chiavaroli,

Ms. Strope, Newmark, and AMH. The Court will also grant the

motions to the extent that they seek dismissal of the RICO claims

alleged by the Inferreras, Ryles, Miller, and Edwards. To the

extent that the motions seek dismissal of the RICO claims alleged

by all other plaintiffs, the Court will deny the motions. With

regard to the state clams, the Court will grant the motions in

part and deny them in part.

I. Factual Background 

The defendants consist of a group of insurance

companies (the “Insurance Company Group”), a group of salespeople

(the “Sales Group”), and a group of attorneys (the “Attorney

Group”). According to the plaintiffs, these three groups worked

together to execute an allegedly fraudulent scheme whose goal was

Case 2:05-md-01712-MAM Document 207 Filed 08/30/07 Page 6 of 96
3

to sell senior citizens unnecessary and unsuitable estate

planning instruments and annuities. (Stein ¶¶ 1-8; Gilmour ¶ 1;

Trimble ¶ 2; Treitz ¶ 2). 

A. The Scheme

According to the plaintiffs, the Insurance Company

Group was the architect of the allegedly fraudulent scheme. It 

was this group of defendants that originally developed and

underwrote the annuities at issue in this litigation. These

annuities, the plaintiffs allege, possessed certain

characteristics, such as lengthy deferral periods (i.e., receipt

of monthly payments would be deferred) and large surrender

charges (i.e., early-withdrawal penalties), that rendered them

unsuitable investments for senior citizens. It was this very

class of individuals, however, that the Insurance Company Group

targeted for sale of its product. (Stein ¶¶ 11-13; Gilmour ¶¶

173-81; Trimble ¶¶ 146-54; Treitz ¶¶ 169-77).

The Insurance Company Group induced these individuals

to buy its annuities by devising an allegedly fraudulent sales

scheme, which it then disseminated to members of both the Sales

Group and the Attorney Group via standardized marketing materials

and sales presentations. Under this scheme, the Insurance

Company Group provided Sales Group members with “leads” that

consisted of individuals who were 65 years or older and who had

an estimated income bracket of $35,000 or more. Through the

Case 2:05-md-01712-MAM Document 207 Filed 08/30/07 Page 7 of 96
4

standardized marketing materials and sales presentations, the

Insurance Company Group taught the Sales Group members how to

first gain the trust of these potential annuity purchasers and

then how to take advantage of that trust by selling them

unnecessary and unsuitable estate planning instruments and

annuities. (Stein ¶¶ 14-22, 223; Gilmour ¶¶ 174-77; Trimble ¶¶

147-50; Treitz ¶¶ 170-73).

 As set forth in the Insurance Company Group’s marketing

materials and sales presentations, members of the Sales Group

would gain the trust of senior citizens by conferring upon

themselves imaginary titles, such as “Certified Elder Adviser” or

“Certified Senior Adviser.” In addition, the materials

instructed the Sales Group members to establish relationships

with attorneys who were willing to allow the salespeople to

identify themselves as lawyers or agents of lawyers. Such selfidentification, the plaintiffs allege, induced potential annuity

purchasers to trust members of the Sales Group as though they

were objective advisers, rather than individuals with financial

incentives to sell annuities. (Stein ¶¶ 14-23; Gilmour ¶¶ 194-

99; Trimble ¶¶ 167-73; Treitz ¶¶ 190-96).

Having thus cloaked their true intentions, members of

the Sales Group were then instructed to conduct seminars (or

other such seemingly informational presentations) at which the

salespeople would offer ostensibly disinterested financial

Case 2:05-md-01712-MAM Document 207 Filed 08/30/07 Page 8 of 96
5

advice. At these presentations, the Sales Group members were

instructed to hold themselves out as disinterested financial

planners whose only affiliation was with an attorney. Instead of

offering disinterested advice, however, members of the Sales

Group used these seminars and presentations, which were developed

by the Insurance Company Group, solely as a way of convincing

senior citizens to purchase the Insurance Company Group’s

annuities. (Stein ¶¶ 250-57; Gilmour ¶¶ 194-200; Trimble ¶¶ 167-

73; Treitz ¶¶ 190-96).

When conducting these presentations, members of the

Sales Group were instructed to encourage attendees to set up

living trusts through the attorneys with whom the Sales Group

members had previously established relationships -- the Attorney

Group. Such living trusts would, members of the Sales Group

assured attendees, help minimize taxes, as well as avoid certain

pitfalls associated with wills and probate. The process of

creating these living trusts, however, was simply a convenient

way of further cloaking the salesperson’s true intentions, as

well as identifying assets that could be used to purchase

annuities. (Stein ¶¶ 251-58; Gilmour ¶¶ 196-202; Trimble ¶¶ 171-

77; Treitz ¶¶ 194-200).

The process of creating a living trust helped the Sales

Group members accomplish these goals because it entails taking an

inventory of all the living-trust purchaser’s assets. Only by

Case 2:05-md-01712-MAM Document 207 Filed 08/30/07 Page 9 of 96
6

placing all assets within the trust could the living-trust

purchaser possibly achieve the tax-minimization and probateavoidance goals that were touted as the benefits of the product. 

The Sales Group members could thus further identify themselves as

lawyers or associates of lawyers by taking this inventory, as

well as identify which assets could be used to purchase the

Insurance Company Group’s annuities. (Stein ¶¶ 251-58; Gilmour

¶¶ 196-202; Trimble ¶¶ 171-77; Treitz ¶¶ 194-200).

At the conclusion of these presentations, Sales Group

members would schedule follow-up visits with the attendees. At

these follow-up visits, the Sales Group members would again urge

the potential annuity purchasers to set up living trusts so that

the salespeople could use the inventory process as a “dooropener” for selling the Insurance Company Group’s annuities. 

Alternatively, if the individual had already purchased such an

instrument, the Sales Group members would immediately take an

inventory of the potential purchaser’s assets, ostensibly so that

the living trust could achieve its goals. Upon taking the

inventory, the Sales Group members would recommend that the

potential purchaser use any available assets to purchase one or

more of the Insurance Company Group’s annuities. The Sales Group

members would bolster this recommendation by representing that

the annuity was a “suitable” investment. If the individual

agreed to buy an annuity, the Sales Group member would sell him

Case 2:05-md-01712-MAM Document 207 Filed 08/30/07 Page 10 of 96
7

the product, thereby earning a hefty commission. (Stein ¶¶ 254-

58; Gilmour ¶¶ 199-203; Trimble ¶¶ 172-76; Treitz ¶¶ 195-99).

In the course of selling the living trusts and

annuities, the Sales Group members were instructed to make

several alleged material misrepresentations and omissions to

potential purchasers, including (i) the alleged misrepresentation

that the salespeople were neutral financial advisers when they

were not, (ii) the alleged misrepresentation that a living trust

would help the purchaser reduce taxes and avoid probate when it

did not, (iii) the alleged misrepresentation that the annuities

were “suitable” investments for the purchasers, and (iv) the

alleged material omission that the long-term deferred annuities

contained lengthy deferral periods, large surrender charges, and

substantial early-withdrawal penalties on death benefits. (Stein

¶¶ 14, 254, 259; Gilmour ¶¶ 1, 2, 43; Trimble ¶¶ 2-6; Treitz ¶¶

2-7). 

B. The Defendants

The named defendants in the four lawsuits that are

currently under consideration vary. In the Stein consolidated

class action, the plaintiffs sue only members of the Insurance

Company Group. In the Gilmour, Trimble, and Treitz individual

actions, the plaintiffs sue members of the Insurance Company

Group, the Sales Group, and the Attorney Group. Despite this

difference in named defendants, the complaints are virtually

Case 2:05-md-01712-MAM Document 207 Filed 08/30/07 Page 11 of 96
 The Second Amended Consolidated Class Action Complaint also 2

names AmerUs Life Insurance Company (“AML”). The Insurance

Company Group filed a supplemental motion to dismiss stating that

AML had not been properly served and reserving all rights and

defenses of AML. AML may move to dismiss at a later date.

8

identical in their description of the allegedly fraudulent

scheme, as well as the various defendants’ alleged participation

therein.

1. The Insurance Company Group

The Insurance Company Group consists of AmerUs Group

Company (“AMH”); AmerUs Annuity Group Co. (“AAG”); American

Investors Life Insurance Co. (“AILIC”); American Investors Sales

Group “(AISG”); Creative Marketing International Corporation

(“CMIC”); and Insurance Agency Marketing Services, Inc.

(“IAMS”).2

Defendant AMH is a holding company whose subsidiaries

are primarily engaged in the business of marketing, underwriting,

and distributing a broad range of individual life, annuity, and

insurance deposit products to individuals and businesses. AAG is

a wholly owned subsidiary of AMH. AILIC, AISG, CMIC, and IAMS

are, in turn, wholly owned subsidiaries of AAG. AILIC is in the

business of underwriting and issuing annuities. AISG, CMIC, and

IAMS are engaged in the business of marketing, underwriting, and

distributing a broad range of life insurance and annuity

Case 2:05-md-01712-MAM Document 207 Filed 08/30/07 Page 12 of 96
 Michael Horowitz is identified in the caption of the Gilmour 3

complaint as “Michael Horowitz, a/k/a Michael Hamilton,” and he

is referred to in the body of the complaint as “Michael

Hamilton.” Because “Michael Horowitz” appears from the caption

of the case to be this defendant’s true name, the Court will

refer to him throughout this opinion as “Michael Horowitz” or

simply “Horowitz.”

9

products. (Stein ¶¶ 8-13, 46-54; Gilmour ¶¶ 8-13; Trimble ¶¶ 13-

22; Treitz ¶¶ 17-26).

2. The Sales Group

The Sales Group consists of the individual salespeople,

as well as the entities employing them, who executed the

allegedly fraudulent scheme. This group constitutes the conduit

through whom the Insurance Company Group interacted directly with

potential annuity purchasers. These salespeople and entities

include Brian Newmark (“Newmark”), Victoria Larson (“Larson”),

Kenneth Krygowski (“Krygowski”), Diane Strope (“Ms. Strope”),

Stephen Strope (“Mr. Strope”), Mary Chiavaroli (“Chiavaroli”),

Ralph Spangler (“Spangler”), Michael Horowitz (“Horowitz”),3

Estate Planning Advisers Corp. (“EPAC”), the Patriot Group, Best

Estate Services (“BES”), and Guardian Insurance Agency, Inc.

(“Guardian”). (Stein ¶¶ 6, 56-61; Gilmour ¶¶ 30-38; Trimble ¶¶

36-38; Treitz ¶¶ 40-46).

Case 2:05-md-01712-MAM Document 207 Filed 08/30/07 Page 13 of 96
 Richard and Dena Stein, Mary Lynch, Charlotte and Beryl 4

Price, George Miller, Edward and Gloria Inferrera, Jean Ryles,

Evelyn Edwards, and Jonathan Upchurch are named plaintiffs in the

Stein consolidated class action complaint. Walter Gilmour,

Harcourt Trimble, III, and Margie Brennan Treitz are the

plaintiffs in the three individual cases.

10

3. The Attorney Group

The Attorney Group consists of people who actually are,

or at one time were, members of the bar of a state in the United

States and who prepared living trust documents and/or other

estate planning documents for senior citizens in connection with

the purchase of the defendants’ annuities. These attorneys

furthered the allegedly fraudulent scheme by allowing Sales Group

members to use the attorney-client relationship to mask the

salespeople’s financial incentives, as well as discover assets

that could be transferred into the Insurance Company Group’s

annuities. Members of this group include Barry Bohmueller

(“Bohmueller”), Brett Weinstein (“Weinstein”), and Jason Plaza

(“Plaza”). (Stein ¶¶ 6, 55; Gilmour ¶¶ 19-29; Trimble ¶¶ 23-32;

Treitz ¶¶ 27-36).

C. The Plaintiffs and Their Individual Allegations4

1. Richard and Dena Stein

In early 2002, Richard and Dena Stein (“the Steins”)

responded to an advertisement for a seminar about financial

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11

planning. At the seminar, Larson and other representatives of

EPAC held themselves out as neutral estate planners who could 

help the Steins by providing estate planning services. Larson

also identified herself as a financial adviser and an employee of

attorney Bohmueller. At no time did Larson or any of the other

presenters identify themselves as salespeople. At the end of the

seminar, the Steins identified themselves to Larson and informed

her that they wished to work with her to plan their estate and

finances.

On or about April 23, 2002, Larson came to the Steins’

home and conducted an in-depth interview. During this visit,

Larson made representations to the Steins about the purported

advantages that a living trust possesses over wills and probate. 

At a subsequent visit, the Steins gave Larson $600, payable to

“Barry Bohmueller,” for the purchase of a living trust. During

the same visit, Larson convinced the Steins to liquidate

$20,147.88 held in an IRA to purchase an AILIC annuity on Mr.

Stein. 

Larson did not, however, inform the Steins that the

annuity was a fifteen-year deferred annuity whose payments would

not start until Mr. Stein turned 90. Larson also failed to

disclose the large penalties for any withdrawal that occurred

earlier than that date. And finally, Larson represented that the

annuity would be available to Mrs. Stein, the beneficiary,

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12

immediately following Mr. Stein’s death, despite the fact that

the money would have to be left with the defendants for five

years after Mr. Stein’s death to avoid paying substantial

penalties. (Stein ¶¶ 98-114).

2. Mary Lynch

Mary Lynch (“Lynch”) came into contact with the

defendants through a seminar on estate planning, which she heard

about through an advertisement at a local senior center. At the

seminar, which was conducted by Larson and other sales agents,

the presenters held themselves out as neutral estate planners and

did not identify themselves as insurance salespeople. The

presenters also touted the benefits that living trusts held over

probate and wills. 

On or about July 19, 2001, Michael Ciccone (“Ciccone”)

came to Lynch’s home and conducted an in-depth interview with

her. Following this visit, Ciccone, Larson, and Krygowski came

to Lynch’s home on a number of additional occasions, each time

making representations about the advantages that living trusts

possess over wills and probate. At no time during any of these

visits did Ciccone, Larson, or Krygowski identify themselves as

salespeople. These members of the Sales Group instead held

themselves out as disinterested estate planners who were working

with attorney Bohmueller to best serve Lynch’s estate planning

needs.

Case 2:05-md-01712-MAM Document 207 Filed 08/30/07 Page 16 of 96
13

On or about July 19, 2001, Lynch decided to set up a

living trust, but she declined to purchase an annuity. Lynch

accordingly gave Ciccone a check for $1,795.00, payable to “Barry

Bohmueller,” for the purchase of a living trust. Despite Lynch’s

decision to purchase only a living trust, members of the Sales

Group nevertheless continued to urge her to purchase one or more

of the defendants’ annuities. After several follow-up contacts

by Larson and other EPAC personnel, Lynch finally decided to

purchase an AILIC annuity in early 2003. Lynch liquidated

$65,000 to purchase this annuity.

At the time Lynch purchased the annuity, neither Larson

nor any other members of the Sales Group disclosed the fact that

payments on the annuity would not begin until Lynch reached 125

years of age. The salespeople also failed to disclose the

substantial charges associated with early withdrawal of the

principal invested. Not only did the salespeople fail to

disclose these attributes, but Larson told Lynch that the annuity

funds would be available to her beneficiaries immediately

following her death. In truth, the funds would need to be left

with the defendants for five years after Lynch’s death to avoid

the beneficiaries’ incurring substantial penalties. (Stein ¶¶

115-34).

Case 2:05-md-01712-MAM Document 207 Filed 08/30/07 Page 17 of 96
14

3. Beryl and Charlotte Price

In response to a newspaper advertisement, Beryl and

Charlotte Price (“the Prices”) attended a seminar on EPAC’s

estate planning services in early 2002. At the seminar, Larson

and other EPAC representatives made a presentation detailing how

EPAC’s services could benefit the Prices and the other attendees. 

Shortly after the seminar, Larson called the Prices twice and

arranged to meet with them in their home. 

During that meeting, which occurred on or around

January 23, 2002, Larson spoke to the Prices about the purported

advantages of a living trust and led the Prices to believe that

she was a qualified, experienced estate planner working with the

office of attorney Bohmueller. Larson did not, at any time,

disclose that she was a licensed insurance agent or that she

received commissions for the sale of living trusts and annuities.

Directly after the meeting, the Prices gave Larson a

check for $1,845.00, payable to “Bohmueller Law Offices,” for the

purchase of a living trust. On or around February 28, 2002,

Larson returned to the Prices’ home to deliver a loose-leaf

binder containing the living trust documents that attorney

Bohmueller had ostensibly prepared. Larson told the Prices that

she or attorney Bohmueller would take all the necessary actions

to establish and fund the living trust. She did not, however,

inform the Prices that they needed to transfer their residence or

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15

any other assets into the trust, and she did not do so on their

behalf.

In the course of selling the Prices the living trust

and delivering the documents associated with it, Larson also

urged the Prices to purchase two AILIC annuities. Larson told

the Prices that the rate of return on the annuities would be

greater than what they were earning from their current

investments and that the interest rate on the annuities could

only increase. When the Prices told Larson that they wanted 25%

of their investment to be available for distribution the

following year, she assured them that the annuities would allow

such a distribution. She did not, however, disclose that the

annuities imposed penalties for early withdrawals. Convinced by

Larson’s sales pitch, the Prices liquidated a total of $61,000

from their IRA accounts to purchase two AILIC annuities. (Stein

¶¶ 135-58).

4. Joseph Healy 

In or around August of 2001, Joseph Healy (“Healy”)

attended an estate planning seminar conducted by Larson and other

EPAC personnel. At the seminar, Larson gave Healy a piece of

paper indicating that she was a “Certified Senior Adviser” for

EPAC. Sometime after the seminar, Larson and Krygowski visited

Healy at his home to discuss his estate plan and the purported

advantages of a living trust. Larson and Krygowski also led

Case 2:05-md-01712-MAM Document 207 Filed 08/30/07 Page 19 of 96
16

Healy to believe that they were qualified and experienced estate

planners working with attorney Bohmueller’s office. Larson even

gave Healy a card from “Bohmueller Law Offices” on which she had

written her name. Neither Larson nor Krygowski told Healy that

they were licensed insurance agents or that they received

commissions for the sale of living trusts and annuities. 

On or around August 29, 2001, Healy gave Krygowski a

check for $1,795.00, payable to “Bohmueller Law Offices,” for the

purchase of a living trust. Over the next few months, Larson and

Krygowski persuaded Healy to purchase an AILIC deferred annuity

with an initial premium of $106,916.87. Neither Larson nor

Krygowski disclosed that payments on the annuity would not begin

for fifteen years after purchase or that any withdrawals of

principal in the first ten years after purchase would be subject

to substantial penalties. (Stein ¶¶ 159-73).

5. Jean Ryles

Jean Ryles (“Ryles”) was induced into purchasing two

AILIC annuities by unnamed representatives of American Family

Legal Plan (“AFLP”). These salespeople came to Ryles’ home,

holding themselves out as disinterested estate planners working

for, or on behalf of, attorney Weinstein, and made a presentation

regarding the benefits of their services. During this

presentation, the salespeople extolled the advantages that living

trusts have over probate and wills. 

Case 2:05-md-01712-MAM Document 207 Filed 08/30/07 Page 20 of 96
17

As a result of this presentation, Ryles purchased a

living trust, as well as two AILIC annuities whose initial

premiums totaled over $80,000. At no time during the

presentation did the AFLP representatives disclose to Ryles that

they were, in fact, insurance salespeople, or that the annuities

contained early-withdrawal penalties. (Stein ¶¶ 174-82).

6. George Miller

Sometime in 1999, George Miller (“Miller”) responded by

mail to a newspaper advertisement concerning Weinstein living

trusts. Larson and other representatives of the Addison Group

responded by informing Miller that they could provide estate

planning services that would benefit him. After telephoning

Miller to arrange a meeting, Larson came to Miller’s home on or

about June 22, 1999. 

On that date, Larson spoke with Miller about the

supposed advantages of a living trust and led him to believe that

she was a qualified estate planner working with attorney

Weinstein. She did not inform Miller that she was an insurance

agent or that she received commissions from the sale of

annuities. On the day of the meeting, Miller gave Larson a check

for $1,995.00, payable to attorney Weinstein, for the purchase of

a living trust.

During subsequent visits to Miller’s home, Mr. Strope,

another member of the Sales Group, persuaded Miller to liquidate

Case 2:05-md-01712-MAM Document 207 Filed 08/30/07 Page 21 of 96
18

$215,000 from his investment portfolio of predominately blue-chip

investments to purchase an annuity from American Equity

Investment Life Insurance Company, Inc. (“American Equity”). Mr.

Strope did not disclose that the annuity would not make any

payments for ten years or that it imposed surrender charges for

early withdrawals of principal. 

Mr. Strope did, however, tell Miller that the rate of

return on the annuity would be 26.95% per annum. In 2000, Miller

received a statement in the mail from American Equity and

discovered that the rate of return for the annuity was 3%, as

opposed to the 26.95% that Mr. Strope had promised. When Miller

complained to Mr. Strope, Mr. Strope blamed the decreased rate of

return on the decline in the stock market. 

Mr. Strope then convinced Miller to purchase an annuity

from AILIC. Mr. Strope did not disclose to Miller that this

annuity would not make payments for fifteen years or that it also

imposed early-withdrawal penalties. (Stein ¶¶ 183-200).

7. Edward and Gloria Inferrera

Edward and Gloria Inferrera (“the Inferreras”) were

induced into purchasing two of the defendants’ annuities by

Charles Studebaker (“Studebaker”) of Studebaker and Associates, a

duly appointed life insurance agent of the Insurance Company

Group. The initial premium payments on these annuities totaled

approximately $15,000.00. In selling the Inferreras the

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19

annuities, Studebaker used the defendants’ standardized marketing

materials and sales presentations.

Shortly after purchasing the annuities, the Inferreras

incurred substantial medical and other expenses associated with

their deteriorating health. The Inferreras consequently

requested the surrender of their two annuities. Upon being

informed that surrender charges in excess of $6,000 would be

imposed, the Inferreras decided to liquidate other investments to

meet their cash-flow needs. The Inferreras anticipate that they

will soon be forced to withdraw a substantial portion of, if not

surrender, their annuities. As a result, they will be subject to

the surrender charges associated with such an action. (Stein ¶¶

201-05).

8. Evelyn Edwards

Evelyn Edwards (“Edwards”) was induced into purchasing

an AILIC annuity by Christopher Grant Cary (“Cary”), one of the

defendants’ sales agents. Cary convinced Edwards to purchase the

annuity by using the defendants’ standardized marketing

materials, forms, and policies. At no time did Cary fully

disclose the risks and adverse information associated with the

purchase of the defendants’ deferred annuities. Edwards’ initial

premium payment for the annuity was $12,000.00, followed by a

second payment of $15,000.00.

Case 2:05-md-01712-MAM Document 207 Filed 08/30/07 Page 23 of 96
20

Edwards’ health has deteriorated, and she is no longer

capable of living on her own. She has therefore moved into an

assisted living facility in New York State. Edwards is running

out of money and will need to surrender her annuity in the near

future. (Stein ¶¶ 206-09).

9. Jonathan Upchurch/Edith Newcomer

Jonathan Upchurch (“Upchurch”) is the nephew of, and

attorney in fact for, plaintiff Edith Newcomer (“Newcomer”).

Newcomer is a retired schoolteacher who would occasionally attend

neighborhood seminars that provided senior citizens with

financial advice. At one of these seminars, Newcomer was

introduced to Patrick Letizia (“Letizia”), who was a licensed

sales agent of AILIC. In late 1999, Letizia, who claimed to be

an expert in money management and annuities, told Newcomer that

an annuity would help her grow her money. Based on Letizia’s

representation, Newcomer purchased a deferred annuity from

Provident Mutual Life and Annuity Company of America

(“Provident”) for an initial premium of $521,347.68.

In approximately September of 2002, Letizia instructed

Newcomer to terminate her Provident annuity and purchase a new

deferred annuity from AILIC. As a result of her early

termination of the Provident policy, Newcomer was subject to a

$44,074.42 surrender charge. Newcomer then used the balance that

she received from Provident, $568,070.32, to purchase a fifteenCase 2:05-md-01712-MAM Document 207 Filed 08/30/07 Page 24 of 96
21

year deferred annuity from American Investors whose payments

would not begin until Newcomer reached 102 years of age. (Stein

¶¶ 210-18).

10. Walter and Suzanne Gilmour

Walter and Suzanne Gilmour (“the Gilmours”) were

approached on March 22, 2001, by Horowitz, who knocked on the

door of the Gilmours’ residence and identified himself as a

qualified estate planner who was working with attorney

Bohmueller. Horowitz did not, on that day or any other, reveal

that he was in fact a salesperson employed by the Patriot Group. 

Instead, Horowitz promoted and touted the advantages that living

trusts hold over wills and probate. These representations were

substantially similar to those that were contained in the

Insurance Company Group’s standardized marketing materials and

sales presentations. As a result of Horowitz’s representations,

the Gilmours gave Horowitz a check for $1,850.00, payable to

“Bohmueller Law Offices,” for the purchase of a living trust. 

Also at that meeting, Horowitz falsely represented to

the Gilmours that if they put their money into annuities, future

annuity payments would be income-tax and inheritance-tax free. 

At subsequent visits, Mr. Strope, another employee of the Patriot

Group, repeated similar misrepresentations and assured the

Gilmours that the purchase of annuities would be a way of placing

money in the hands of the Gilmours’ beneficiaries immediately,

Case 2:05-md-01712-MAM Document 207 Filed 08/30/07 Page 25 of 96
22

while avoiding probate taxes. The salesmen eventually convinced

the Gilmours to liquidate $1.5 million of their then-existing

assets to purchase two AILIC annuities. 

At no time did Horowitz or Mr. Strope reveal that they

would receive commissions for selling the AILIC annuities. 

Horowitz and Mr. Strope also failed to disclose the substantial

penalties that would accrue if one of the Gilmours’ beneficiaries

attempted to withdraw any of the annuities’ principal within five

years of the annuitant’s death. When Mrs. Gilmour passed away on

February 17, 2005, however, Mr. Gilmour learned that immediate

payment of the death benefits from Mrs. Gilmour’s AILIC annuity

would carry these substantial penalties. (Gilmour ¶¶ 117-71).

11. Harcourt Trimble, III/Harcourt and Barbara Trimble

Harcourt Trimble, III (“Trimble, III”), is the coexecutor of the estate of his father and mother, Harcourt and

Barbara Trimble (“the Trimbles”). Mrs. Trimble passed away on

January 7, 2002, and Mr. Trimble passed away on March 21, 2002. 

The Trimbles were originally approached by the

defendants on May 5, 2001, when Spangler, an employee of the

Patriot Group, came to their home. On that day, Spangler held

himself out as a neutral, qualified estate planner and touted the

advantages that living trusts possess over wills and probate. 

Spangler claimed that such instruments avoid probate, save

attorneys’ fees, assure privacy after death, permit quicker

Case 2:05-md-01712-MAM Document 207 Filed 08/30/07 Page 26 of 96
23

distribution of assets, avoid court challenges, and are required

to avoid guardianship. As a result of these representations, the

Trimbles purchased a living trust by giving Spangler a check made

payable to “Bohmueller Law Offices” in the amount of $1,895.00.

At this meeting and at subsequent meetings, Spangler

also discussed the benefits of the Insurance Company Group’s

annuities. Spangler falsely claimed that any money the Trimbles

used to purchase these annuities, as well as any future payments

from these annuities, would be free of inheritance and income

taxes. In addition, Spangler did not disclose (i) that any such

annuity could not be canceled or rescinded without penalty, (ii)

that the 8.75% interest rate was a first-year interest rate only,

and (iii) that death benefits made under the annuity were subject

to substantial penalties unless the beneficiary agreed to leave

the funds with the Insurance Company Group for five years after

the death of the annuitant. As a result of these

misrepresentations and omissions, the Trimbles liquidated

$666,000 of their stock portfolio to purchase a fifteen-year

deferred annuity that would not begin making payments until Mrs.

Trimble was 100 and Mr. Trimble was 104.

After the Trimbles passed away, Trimble, III, found the

documents for the living trust that his parents had set up

through defendant Bohmueller and accordingly called the attorney. 

In response to the call, Weinstein contacted Trimble, III, and

informed him that he worked with Bohmueller and would be the

Case 2:05-md-01712-MAM Document 207 Filed 08/30/07 Page 27 of 96
24

attorney handling the estate and affairs of the plaintiff’s

parents. Weinstein did not inform Trimble, III, that contrary to

the representations made to his parents, the living trust did not

avoid probate, attorneys’ fees, or costs involved with processing

their estate.

Weinstein proceeded to open the probate estates and to

have the inheritance and income tax returns prepared in 2001. In

connection with these returns, Trimble, III, paid over $57,000 in

inheritance taxes, interest, and penalties. Trimble, III, also

paid Weinstein $19,610.00 in attorneys’ fees. In addition,

Trimble, III, was personally assessed taxes, interest, and

penalties in the amount of $156,762.00 for the 2003 tax year, due

to the allegedly deficient estate planning and legal advice

proffered by Weinstein and Bohmueller. (Trimble ¶¶ 82-144).

12. Margie Brennan Treitz/Gilbert and Joanne Brennan

Margie Brennan Treitz (“Treitz”) is the personal

representative of her mother and father, Gilbert and Joanne

Brennan (“the Brennans”). Mr. Brennan passed away in July of

2003, and Mrs. Brennan passed away in April of 2006.

The Brennans were originally approached by the

defendants on January 26, 2001, when Krygowski, an employee of

EPAC, came to their home. At this meeting, Krygowski held

himself out as a neutral, qualified estate planner and touted the

advantages that living trusts possess over wills and probate. 

Case 2:05-md-01712-MAM Document 207 Filed 08/30/07 Page 28 of 96
25

Krygowski claimed that such instruments avoid probate, save

attorneys’ fees, assure privacy after death, permit quicker

distribution of assets, avoid court challenges, and are required

to avoid guardianship. As a result of these representations, the

Brennans purchased a living trust by giving Krygowski a check

made payable to “Bohmueller Law Offices” in the amount of

$1,795.00.

At this meeting and at subsequent meetings, Krygowski,

who was later joined by Larson, also discussed the benefits of

the Insurance Company Group’s annuities. Krygowski and Larson

falsely claimed that any money the Brennans used to purchase

these annuities, as well as any future payments from these

annuities, would be free of inheritance and income taxes. In

addition, Krygowski and Larson did not disclose (i) that any such

annuity could not be canceled or rescinded without penalty, (ii)

that the 6.75% interest rate was a first-year interest rate only,

and (iii) that death benefits made under the annuity were subject

to substantial penalties unless the beneficiary agreed to leave

the funds with the Insurance Company Group for five years after

the death of the annuitant. As a result of these

misrepresentations and omissions, the Brennans purchased an AILIC

annuity for an initial premium payment of $130,290.54. The

monthly payments on this annuity would not have started until

2016, when Mrs. Brennan would have been 85 and Mr. Brennan would

have been 92.

Case 2:05-md-01712-MAM Document 207 Filed 08/30/07 Page 29 of 96
26

On April 15, 2002, Larson persuaded the Brennans to

liquidate more of their assets and to purchase two more AILIC

annuities. At this time, Mr. Brennan purchased a fifteen-year

deferred annuity for an initial premium payment of $45,678.98,

and Mrs. Brennan purchased a fifteen-year deferred annuity for an

initial premium payment of $71,709.33. Payments on these

annuities would not have begun until Mr. Brennan was 93 and Mrs.

Brennan was 87.

In March of 2003, Mr. Brennan was hospitalized, and his

family contacted Larson to change the trustee and executor of Mr.

Brennan’s living trust from his daughter Margie to his daughter

Ann Marie. In response, Chiavaroli, another employee of EPAC,

contacted Plaza, an attorney employed at Bohmueller’s law office,

to make the requested change. Plaza complied and overnighted the

documents with an unsigned Bohmueller cover letter and

instructions to Ms. Strope, another employee of EPAC. The next

day, Larson brought the documents to the hospital and the

Brennans signed them. On July 23, 2003, Mr. Brennan passed away.

At the time of his death, Mr. Brennan had two AILIC

annuities with a combined accumulated value of $188,657.24. Mrs.

Brennan was the beneficiary of both annuities, but she did not

have any of the documents pertaining to the annuities. On

September 4, 2003, Larson approached Mrs. Brennan and persuaded

her to purchase a new, fifteen-year deferred annuity from AmerUs

for an initial premium payment of $25,942.00. Shortly after this

Case 2:05-md-01712-MAM Document 207 Filed 08/30/07 Page 30 of 96
27

policy application was made, Larson told Mrs. Brennan that she

should also liquidate her remaining assets, as well as Mr.

Brennan’s two annuities, and put the proceeds into this new

annuity. 

In making these recommendations, Larson did not inform

Mrs. Brennan that she could utilize the provisions of her

husband’s annuities to transfer to herself the annuities’ entire

accumulated value. Instead, Larson caused Mrs. Brennan to elect

the lump-sum surrender value of Mr. Brennan’s annuities, which

resulted in Mrs. Brennan incurring a $17,344.49 surrender charge. 

When Mrs. Brennan asked Larson about the approximately $20,000

“fee” that was deducted from the annuity, Larson told her that

the surrender charge was merely a one-time fee that the

government charged when spouses switch names on annuities. In

truth, Larson recommended that Mrs. Brennan elect such a payout

because it would allow Larson to collect an additional commission

from Mrs. Brennan’s placing the proceeds of her husband’s

annuities into the new annuity. 

At no point did Krygowski or Larson disclose that they

were insurance sales agents who would be paid commissions from

the Insurance Company Group. Furthermore, the living trust that

the Brennans purchased did not avoid probate, fees, or

inheritance taxes. (Treitz ¶¶ 92-167).

Case 2:05-md-01712-MAM Document 207 Filed 08/30/07 Page 31 of 96
 The named plaintiffs in these two putative class actions 5

consisted of the Prices, Healy, and Miller. In re Am. Investors

Life Ins. Co. Annuity Mktg. & Sales Practices Litig., MDL No.

1712, 2006 WL 1531152, at *3-*10 (E.D. Pa. June 2, 2006).

28

II. Procedural History and Overview of the Claims

In an opinion dated June 2, 2006, this Court dismissed

two putative class actions in this multidistrict litigation on 5

the ground that the plaintiffs had failed to plead a valid RICO

enterprise. In re Am. Investors Life Ins. Co. Annuity Mktg. &

Sales Practices Litig., MDL No. 1712, 2006 WL 1531152, at *7

(E.D. Pa. June 2, 2006). The plaintiffs in those class actions,

all of whom are named plaintiffs in the Stein consolidated class

action, sued several insurance companies (some of whom were

unrelated, competitor companies), sales agents, and lawyers for

damages arising from an allegedly fraudulent scheme to sell

unnecessary and unsuitable estate planning instruments and

annuities. Id. at *1. The Court held that although the

plaintiffs did allege that the defendants were aware of each

other’s actions and that each defendant performed a critical role

within the alleged scheme, the plaintiffs did not allege that an

organizational structure connected or controlled the various

defendants. Id. at *7-*8.

According to the Court, the complaints did not allege

how the attorneys and the insurance companies were related. Id. 

Furthermore, the complaints failed to allege how certain

competitor insurance companies worked together toward a common

Case 2:05-md-01712-MAM Document 207 Filed 08/30/07 Page 32 of 96
29

goal. Id. at *8. The Court concluded that the plaintiffs

described what appeared to be an enterprise from the outside, but

what turned out to be a collection of entities and individuals

that contained no organizational structure on the inside. Id. 

Such allegations, the Court reasoned, were insufficient to

demonstrate the existence of a RICO enterprise. Id.

The Court accordingly dismissed the plaintiffs’ RICO

claims without prejudice and allowed the plaintiffs to file

amended complaints. Id. at *12. The Court also discussed the

other elements of a RICO claim so that the plaintiffs would have

guidance if they filed such amendments. See id. at *9-*12. 

The plaintiffs have now amended their complaints, and

the defendants have responded by filing a new round of motions to

dismiss. The amended complaints bring claims against the

defendants as follows: 

Claim Stein Gilmour Trimble Treitz

Violation of

RICO

AMH,

AAG,

AILIC,

AML,

CMIC,

IAMS

AMH, AAG,

AILIC, CMIC,

AISG, 

Mr. Strope,

Horowitz,

BES, Patriot

Group,

Guardian,

Bohmueller

AMH, AAG,

AILIC, CMIC,

Patriot

Group,

Spangler,

Weinstein,

Bohmueller

AMH, AAG,

AILIC, CMIC,

Newmark,

Larson,

Krygowski,

Ms. Strope,

Chiavaroli,

EPAC,

Weinstein,

Plaza,

Bohmueller

Case 2:05-md-01712-MAM Document 207 Filed 08/30/07 Page 33 of 96
30

Conspiracy

to Violate

RICO

AMH,

AAG,

AILIC,

AML,

CMIC,

IAMS

AMH, AAG,

AILIC, CMIC,

AISG, 

Mr. Strope,

Horowitz,

BES, Patriot

Group,

Guardian,

Bohmueller

AMH, AAG,

AILIC, CMIC,

Patriot

Group,

Spangler,

Weinstein,

Bohmueller

AMH, AAG,

AILIC, CMIC,

Newmark,

Larson,

Krygowski,

Ms. Strope,

Chiavaroli,

EPAC,

Weinstein,

Plaza,

Bohmueller

Breach of

Fiduciary

Duty

AMH,

AAG,

AILIC,

AML,

CMIC,

IAMS

AMH, AAG,

AILIC, CMIC,

AISG, 

Mr. Strope,

Horowitz,

BES, Patriot

Group,

Guardian,

Bohmueller

AMH, AAG,

AILIC, CMIC,

Patriot

Group,

Spangler,

Weinstein,

Bohmueller

AMH, AAG,

AILIC, CMIC,

Newmark,

Larson,

Krygowski,

Ms. Strope,

Chiavaroli,

EPAC,

Weinstein,

Plaza,

Bohmueller

Negligent

Supervision

AMH,

AAG,

AILIC,

AML,

CMIC,

IAMS

AMH, AAG,

AILIC, CMIC,

AISG,

Bohmueller

AMH, AAG,

AILIC, CMIC,

Weinstein,

Bohmueller

AMH, AAG,

AILIC, CMIC,

Weinstein,

Plaza,

Bohmueller

Unjust

Enrichment

AMH,

AAG,

AILIC,

AML,

CMIC,

IAMS

AMH, AAG,

AILIC, CMIC,

AISG, 

Mr. Strope,

Horowitz,

BES, Patriot

Group,

Guardian,

Bohmueller

AMH, AAG,

AILIC, CMIC,

Patriot

Group,

Spangler,

Weinstein,

Bohmueller

AMH, AAG,

AILIC, CMIC,

Newmark,

Larson,

Krygowski,

Ms. Strope,

Chiavaroli,

EPAC,

Weinstein,

Plaza,

Bohmueller

Case 2:05-md-01712-MAM Document 207 Filed 08/30/07 Page 34 of 96
31

Fraudulent

Misrepresentation

AMH, AAG,

AILIC, CMIC,

AISG, 

Mr. Strope,

Horowitz,

BES, Patriot

Group,

Guardian,

Bohmueller

AMH, AAG,

AILIC, CMIC,

Patriot

Group,

Spangler,

Weinstein,

Bohmueller

AMH, AAG,

AILIC, CMIC,

Newmark,

Larson,

Krygowski,

Ms. Strope,

Chiavaroli,

EPAC,

Weinstein,

Plaza,

Bohmueller

Negligent

Misrepresentation

AMH, AAG,

AILIC, CMIC,

AISG, 

Mr. Strope,

Horowitz,

BES, Patriot

Group,

Guardian,

Bohmueller

AMH, AAG,

AILIC, CMIC,

Patriot

Group,

Spangler,

Weinstein,

Bohmueller

AMH, AAG,

AILIC, CMIC,

Newmark,

Larson,

Krygowski,

Ms. Strope,

Chiavaroli,

EPAC,

Weinstein,

Plaza,

Bohmueller

Civil

Conspiracy

AMH, AAG,

AILIC, CMIC,

AISG, 

Mr. Strope,

Horowitz,

BES, Patriot

Group,

Guardian,

Bohmueller

AMH, AAG,

AILIC, CMIC,

Patriot

Group,

Spangler,

Weinstein,

Bohmueller

AMH, AAG,

AILIC, CMIC,

Newmark,

Larson,

Krygowski,

Ms. Strope,

Chiavaroli,

EPAC,

Weinstein,

Plaza,

Bohmueller

Professional

Negligence

Bohmueller AMH, AAG,

AILIC, CMIC,

Patriot

Group,

Spangler,

Weinstein,

Bohmueller

Weinstein,

Plaza,

Bohmueller

Case 2:05-md-01712-MAM Document 207 Filed 08/30/07 Page 35 of 96
32

Breach of

Contract

AMH, AAG,

AILIC, CMIC,

AISG, 

Mr. Strope,

Horowitz,

BES, Patriot

Group,

Guardian,

Bohmueller

AMH, AAG,

AILIC, CMIC,

Patriot

Group,

Spangler,

Weinstein,

Bohmueller

AMH, AAG,

AILIC, CMIC,

Newmark,

Larson,

Krygowski,

Ms. Strope,

Chiavaroli,

EPAC,

Weinstein,

Plaza,

Bohmueller

Violation of

Pennsylvania

Unfair Trade

Practices

and Consumer

Protection

Law

AMH, AAG,

AILIC, CMIC,

AISG, 

Mr. Strope,

Horowitz,

BES, Patriot

Group,

Guardian,

Bohmueller

AMH, AAG,

AILIC, CMIC,

Patriot

Group,

Spangler,

Weinstein,

Bohmueller

AMH, AAG,

AILIC, CMIC,

Newmark,

Larson,

Krygowski,

Ms. Strope,

Chiavaroli,

EPAC,

Weinstein,

Plaza,

Bohmueller

Negligence

Per Se

AMH, AAG,

AILIC, CMIC,

AISG, 

Mr. Strope,

Horowitz,

BES, Patriot

Group,

Guardian,

Bohmueller

AMH, AAG,

AILIC, CMIC,

Patriot

Group,

Spangler,

Weinstein,

Bohmueller

AMH, AAG,

AILIC, CMIC,

Newmark,

Larson,

Krygowski,

Ms. Strope,

Chiavaroli,

EPAC,

Weinstein,

Plaza,

Bohmueller

Accounting AMH, AAG,

AILIC, CMIC,

AISG, 

Mr. Strope,

Horowitz,

BES, Patriot

Group,

Guardian,

Bohmueller

AMH, AAG,

AILIC, CMIC,

Patriot

Group,

Spangler,

Weinstein,

Bohmueller

AMH, AAG,

AILIC, CMIC,

Newmark,

Larson,

Krygowski,

Ms. Strope,

Chiavaroli,

EPAC,

Weinstein,

Plaza,

Bohmueller

Case 2:05-md-01712-MAM Document 207 Filed 08/30/07 Page 36 of 96
 When considering a motion to dismiss under Fed. R. Civ. P. 6

12(b)(6), a court accepts all facts and allegations listed in the

complaint as true and construes them in the light most favorable

to the plaintiff. H.J. Inc. v. Nw. Bell Tel. Co., 492 U.S. 229,

249 (1989); Rocks v. City of Phila., 868 F.2d 644, 645 (3d Cir.

1989). “[A] complaint should not be dismissed for failure to

state a claim unless it appears beyond doubt that the plaintiff

can prove no set of facts in support of his claim which would

entitle him to relief.” Conley v. Gibson, 355 U.S. 41, 45-46

(1957). When considering a motion for judgment on the pleadings

that is based on failure to state a claim, a Court should apply

the same standard as that which is a applied to such a motion

brought pursuant to Rule 12(b). Turbe v. Virgin Islands, 938

F.2d 427, 428 (3d Cir. 1991).

33

The following motions to dismiss are pending before the

Court:

• AMH, AAG, AILIC, AML, CMIC, IAMS, and AISG’s

motions to dismiss and for judgment on the

pleadings in all four complaints;

• The Patriot Group’s motion to dismiss the Gilmour

complaint;

• Brian Newmark, EPAC, Larson, Ms. Strope,

Krygowski, and Chiavaroli’s motion to dismiss the

Treitz complaint;

• Attorney Bohmueller’s motions to dismiss the

Gilmour, Trimble, and Treitz complaints; and 

• Attorneys Weinstein and Plaza’s motions to dismiss

the Trimble and Treitz complaints.

III. Analysis6

The Court will first discuss which defendants should be

dismissed because there are no allegations of wrongdoing in fact

against them. The Court will then turn to the merits of the

plaintiffs’ RICO claims. And finally, the Court will address the

merits of the plaintiffs’ various state law claims.

Case 2:05-md-01712-MAM Document 207 Filed 08/30/07 Page 37 of 96
34

A. Defendants Dismissed for Failure to State Any Claim

The Court will dismiss Chiavaroli and Ms. Strope from

the Treitz case because the complaint does not allege that they

participated in any wrongdoing with respect to the plaintiffs in

that lawsuit. The sole allegations against Chiavaroli and Ms.

Strope are that (i) the two individuals were employed by

Bohmueller and/or one or more of the other defendants, (ii)

Chiavaroli had communications with Plaza regarding the amendment

to Mr. Brennan’s living trust, and (iii) Ms. Strope was the

addressee on an overnighted package of documents relating to the

amendment. (Treitz ¶¶ 45-46, 112-13). 

The Court will also dismiss Newmark from the Treitz

case because the complaint does not allege that Newmark

personally participated in any wrongdoing with respect to the

plaintiffs in that lawsuit. Newmark is not alleged to have ever

met the Brennans, nor is he alleged to have personally

participated in the sale of any annuities to the Brennans.

Newmark’s sole connection to the Brennans’ purchase of annuities

is his status as the President of EPAC, the company that employed

the sales agents who allegedly made misrepresentations to the

Brennans in connection with their annuity purchase. (Treitz ¶

42). Such an allegation is insufficient to state a claim against

Newmark. See Wicks v. Milzoco Builders, Inc., 470 A.2d 86, 90

(Pa. 1983) (noting the “general, if not universal, rule” that an

Case 2:05-md-01712-MAM Document 207 Filed 08/30/07 Page 38 of 96
 In each one of their motions to dismiss, the Insurance 7

Company Group defendants argue that the plaintiffs have failed to

allege any claims of wrongdoing against one or more of the

related insurance companies. At this point in the litigation,

the Court will not dismiss any of these corporations on this

basis, except AMH. AAG and AILIC are alleged to have

participated in the alleged scheme by underwriting certain of the

plaintiffs’ annuities. (Stein ¶¶ 45, 106). CMIC, IAMS, and AISG

are alleged to have developed the allegedly fraudulent marketing

materials. (Stein ¶¶ 96-97).

35

officer of a corporation is not personally liable to third

persons for the acts of other agents, officers, or employees of

the corporation, unless he specifically directed the particular

act to be done, or participated or cooperated therein).

The Court will likewise dismiss AMH from all cases

because the plaintiffs’ sole allegation against this defendant is

that it was the holding company for AAG, AILIC, CMIC, IAMS, and

AISG. There is no piercing the corporate veil or alter ego 7

claim alleged in any of the complaints.

B. RICO

1. Claim Under Section 1962(c)

All the plaintiffs have alleged that the defendants

violated section 1962(c) of the RICO statutes. Section 1962

provides, in relevant part, that “[i]t shall be unlawful for any

person employed by or associated with any enterprise . . . to

conduct or participate, directly or indirectly, in the conduct of

such enterprise’s affairs through a pattern of racketeering

activity . . . .” 18 U.S.C. § 1962(c) (2000). To state a claim

Case 2:05-md-01712-MAM Document 207 Filed 08/30/07 Page 39 of 96
 The defendants do not argue that the plaintiffs have failed 8

to plead the “pattern” element of a section 1962(c) claim. The

Court therefore will not discuss this element.

36

for a violation of section 1962(c), a plaintiff must allege that

each defendant (i) conducted or participated in the conduct (ii)

of an enterprise (iii) through a pattern (iv) of racketeering

activity. Lum v. Bank of Am., 361 F.3d 217, 223 (3d Cir. 2004). 

In addition, to have standing to bring such a claim, a plaintiff

must demonstrate that he or she has been injured in his or her

business or property by the conduct constituting the violation. 

Sedima, S.P.R.L. v. Imrex Co., 473 U.S. 479, 496 (1985). 

The defendants argue that the plaintiffs have not

adequately alleged one or more of these elements. In addressing

these arguments, the Court will begin by determining whether the

plaintiffs have adequately pled the existence of a RICO

enterprise. The Court will then discuss the “conduct or

participation,” and “racketeering activity” elements of the

claim. The Court will conclude by discussing whether the 8

plaintiffs have alleged an injury to their business or property.

a. Existence of an Enterprise

RICO defines the term “enterprise” to include “any

individual, partnership, corporation, association, or other legal

entity, and any union or group of individuals associated in fact

although not a legal entity.” 18 U.S.C. § 1961(4). The

plaintiffs allege an association-in-fact enterprise consisting of

Case 2:05-md-01712-MAM Document 207 Filed 08/30/07 Page 40 of 96
37

members of the Insurance Company Group, the Sales Group, and the

Attorney Group. The Court finds that the plaintiffs have pled a

valid RICO enterprise.

To establish the existence of an association-in-fact

enterprise, a plaintiff must prove: (i) that there exists an

ongoing organization, formal or informal; (ii) that the various

associates of the organization function as a continuing unit; and

(iii) that the organization has an existence separate and apart

from the alleged pattern of racketeering activity. United States

v. Turkette, 452 U.S. 576, 583 (1981); United States v.

Riccobene, 709 F.2d 214, 221 (3d Cir. 1983).

(1) The Existence of an Ongoing Organization

In Riccobene, the United States Court of Appeals for

the Third Circuit explained that the “ongoing organization”

attribute relates to the superstructure or framework of the

alleged enterprise. Riccobene, 709 F.2d at 222. To satisfy this

attribute, a plaintiff must demonstrate that some sort of

hierarchical or consensual structure exists within the group for

the making of decisions. Id. According to the Court of Appeals,

“[t]here must be some mechanism for controlling and directing the

affairs of the group on an on-going, rather than ad hoc, basis.” 

Id. Such a requirement does not mean, however, that every

decision must be made by the same person; authority may be

delegated. Id.

Case 2:05-md-01712-MAM Document 207 Filed 08/30/07 Page 41 of 96
38

In the present case, the defendants argue that the

plaintiffs’ allegations are insufficient to satisfy the “ongoing

organization” attribute of a RICO enterprise. According to the

defendants, the plaintiffs fail to allege that a structure

existed for making decisions and resolving disputes in carrying

out the alleged scheme. Furthermore, the defendants argue that

the plaintiffs’ allegations negate the “ongoing organization”

attribute because they fail to allege any connection between the

Insurance Company Group and the Attorney Group. The plaintiffs’

allegations, the defendants argue, show only the ability of the

Insurance Company Group to oversee the Sales Group’s sale of

annuities, not the Attorney Group’s provision of legal services. 

The Court finds that the plaintiffs have properly pled

the “ongoing organization” attribute of a RICO enterprise. 

According to the plaintiffs, the Insurance Company Group stood at

the head of the alleged enterprise and directed the activities of

the association-in-fact on an ongoing basis. (Stein ¶¶ 248, 263; 

Gilmour ¶¶ 192, 210; Trimble ¶¶ 165, 183; Treitz ¶¶ 188, 206). 

The Insurance Company Group wielded this control by developing a

highly structured sales scheme, which it disseminated to the

Sales Group members via standardized marketing materials and

sales presentations. (Stein ¶¶ 12, 78; Gilmour ¶ 53; Trimble ¶

147-50; Treitz ¶¶ 170-73). As directed by the Insurance Company

Group, the Sales Group members then communicated this scheme to

Case 2:05-md-01712-MAM Document 207 Filed 08/30/07 Page 42 of 96
39

members of the Attorney Group. (Stein ¶ 257; Gilmour ¶¶ 203,

215; Trimble ¶¶ 176, 188; Treitz ¶¶ 199, 211). 

Under this scheme, the members of each group played

specific roles. The Insurance Company Group designed and

disseminated the allegedly fraudulent sales scheme, provided

“leads” that consisted of potential annuity purchasers, and

underwrote the annuities that were ultimately sold. The Sales

Group members followed the Insurance Company Group’s detailed

instructions by associating with attorneys who were willing to

participate in the scheme and then executing the scheme according

to the Insurance Company Group’s standardized marketing materials

and sales presentations. And finally, the Attorney Group also

followed the instructions of the Insurance Company Group, which

called for the attorneys to allow members of the Sales Group to

use the living-trust creation process as a tool for selling

annuities. (Stein ¶¶ 14-25, 233; Gilmour ¶¶ 174-81; Trimble ¶¶

147-54; Treitz ¶¶ 170-77). 

According to the plaintiffs, the Insurance Company

Group maintained control over the alleged association-in-fact by

(i) disseminating the standardized marketing materials and sales

presentations to the Sales Group members, (ii) instructing the

Sales Group members to communicate the scheme to the Attorney

Group, (iii) exercising authority to approve or disapprove all

written marketing materials that were shown to potential annuity

purchasers, (iv) underwriting the annuities that were sold

Case 2:05-md-01712-MAM Document 207 Filed 08/30/07 Page 43 of 96
40

pursuant to the scheme, and (iv) paying the Sales Group members

commissions for the sale of annuities. (Stein ¶¶ 248, 263;

Gilmour ¶¶ 192, 210; Trimble ¶¶ 165, 183; Treitz ¶¶ 188, 206). 

Although it is true that the plaintiffs do not allege

that the Insurance Company Group paid the members of the Attorney

Group directly, the plaintiffs do allege that the members of the

Attorney Group followed the Insurance Company Group’s

instructions in executing the scheme. (Stein ¶¶ 265-68; Gilmour

¶¶ 212-16; Trimble ¶¶ 185-89; Treitz ¶¶ 208-12). The Attorney

Group members followed these instructions because, according to

the plaintiffs, the entire scheme would not work unless they did

so. (Stein ¶¶ 257-58; Gilmour ¶ 204; Trimble ¶ 177; Treitz ¶

200). Thus, the Insurance Company Group wielded control over the

Attorney Group members by providing them with a scheme whose

success -- and therefore the attorneys’ ability to make money

from the sale of living trusts incident to the execution of the

scheme –- depended on the attorneys’ following the instructions

set forth in the marketing materials and sales presentations. 

(Id.)

The present complaints are distinguishable from the

complaints that the Court dismissed for failure to plead a valid

RICO enterprise in its previous opinion. See In re Am. Investors

Life Ins. Co., 2006 WL 1531152. In the previous complaints, the

plaintiffs failed to allege that an organizational structure

connected or controlled the various associates of the alleged

Case 2:05-md-01712-MAM Document 207 Filed 08/30/07 Page 44 of 96
41

enterprise. Id. at *7-*8. The previous complaints did not

allege any connection at all between the Insurance Company Group

and the Attorney Group, and the complaints failed to allege how

certain competitor insurance companies worked together toward a

common goal. Id. 

Here, the plaintiffs have alleged a highly structured

organization that was overseen and directed by the Insurance

Company Group. According to the plaintiffs, the defendants were

not simply a string of participants in a scheme that lacked any

distinct structure or system of authority. Rather, the

enterprise, as alleged, depended for its success on the

participants’ following the instructions developed and

disseminated by the Insurance Company Group -- instructions that

allegedly governed the conduct of the association-in-fact from

the identification of the sales target all the way to the sale of

the actual annuity, complete with the reward system that

motivated the sales agents and attorneys to repeat the process. 

See In re Nat’l W. Life Ins. Deferred Annuity Litig., 467 F.

Supp. 2d 1071, 1081 (S.D. Cal. 2006).

(2) The Various Associates Functioned as a

Continuing Unit 

The second essential attribute of an enterprise under

RICO is that the various associates of the alleged enterprise

must function as a continuing unit. Riccobene, 709 F.2d at 223. 

This attribute may be satisfied even though individuals leave the

Case 2:05-md-01712-MAM Document 207 Filed 08/30/07 Page 45 of 96
42

group and new members join at a different time. Id. Each

associate of the alleged enterprise must, however, perform a role

in the group consistent with the organizational structure

established by the first attribute and which furthers the

activities of the organization. Id.

In the present case, the defendants argue that the

plaintiffs’ association-in-fact is too nebulous and imprecise to

constitute an enterprise. According to the defendants, the

plaintiffs’ use of the term “group” is simply an artful pleading

device for artificially combining unrelated individuals and that

RICO does not permit the “grouping” of “groups” without

consideration of whether all the individuals or entities within

the “group” are actually associated in fact. 

The Court agrees with the defendants that the

plaintiffs may not manufacture a RICO enterprise by using the

term “group,” but it finds that the plaintiffs have alleged facts

that are sufficient to show that the various associates of the

alleged enterprise functioned as a continuing unit. Stripped of

their “group” nomenclature, the associates of the alleged

association-in-fact consist of several related corporations that

engaged in various aspects of the insurance industry, their sales

agents, and the attorneys who helped the sales agents to sell the

insurance companies’ annuities. (Stein ¶¶ 6-10; Gilmour ¶¶ 8-36;

Trimble ¶¶ 13-32; Treitz ¶¶ 17-36). Although the sales agents

and attorneys involved in each annuity sale were not identical,

Case 2:05-md-01712-MAM Document 207 Filed 08/30/07 Page 46 of 96
43

their roles in the organizational structure of the alleged

enterprise remained the same. (Stein ¶¶ 14-25, 233; Gilmour ¶¶

174-81; Trimble ¶¶ 147-54; Treitz ¶¶ 170-77). Indeed, the

plaintiffs allege that the sales scheme only worked if these

sales agents and attorneys played the exact roles and followed

the specific instructions set forth in the insurance companies’

standardized marketing materials and sales presentations. (Stein

¶¶ 257-58; Gilmour ¶ 204; Trimble ¶ 177; Treitz ¶ 200). The

Court accordingly finds that the plaintiffs have adequately pled

the second essential attribute of a RICO enterprise.

(3) Existence Separate and Apart from

Alleged Racketeering Activity 

The third essential attribute of a RICO enterprise is

that the organization constitute an entity that is separate and

apart from the pattern of activity in which it engages. 

Riccobene, 709 F.2d at 223. This last attribute does not require

a plaintiff to allege that the enterprise has some function

wholly unrelated to the racketeering activity, but rather that it

has an existence beyond that which is necessary to commit the

predicate racketeering offenses. Id. at 223-24. In Town of

Kearny v. Hudson Meadows Urban Renewal Corp., 829 F.2d 1263 (3d

Cir. 1987), the United States Court of Appeals for the Third

Circuit found that the separate existence requirement was

satisfied where persons associated with the enterprise engaged in

two separate but similar schemes. Id. at 1266.

Case 2:05-md-01712-MAM Document 207 Filed 08/30/07 Page 47 of 96
44

In the present case, the defendants argue that the

plaintiffs’ allegations do not satisfy the “separateness”

attribute of a RICO enterprise because the plaintiffs fail to

allege that the association-in-fact itself existed separate and

apart from the pattern of racketeering activity at issue in the

litigation. According to the defendants, the plaintiffs plead

only that the individual members of the association-in-fact were

separate and apart from the alleged racketeering activity.

The Court finds that the plaintiffs have sufficiently

pled the “separateness” attribute of a RICO enterprise. The

plaintiffs allege that the members of the association-in-fact

engage in other activities besides those at issue in this

complaint, including selling annuities to persons not similarly

situated to the plaintiffs, selling insurance products other than

annuities, and providing financial planning and retirement

planning to persons other than the plaintiffs. (Stein ¶ 247;

Gilmour ¶ 190; Trimble ¶ 163; Treitz ¶ 186). Although this

allegation is ambiguous as to whether it refers to the individual

members of the enterprise or to the enterprise as a whole, at

this stage of the litigation, the Court is obligated to construe

the allegations in the light most favorable to the plaintiff. 

H.J., 492 U.S. at 249. The Court therefore reads this allegation

as stating that the association-in-fact worked together to engage

in activities other than those at issue in the complaints.

Case 2:05-md-01712-MAM Document 207 Filed 08/30/07 Page 48 of 96
 Courts have also required section 1962(c) plaintiffs to show 9

that the defendant is distinct from the alleged enterprise. This

requirement stems from the statute’s language that the “person”

sued must be “employed by or associated with” an enterprise. 

Because an enterprise cannot logically employ or associate with

itself, the defendant must be distinct from the alleged

enterprise. Brittingham v. Mobil Corp., 943 F.2d 297, 300 (3d

Cir. 1991) (citing B.F. Hirsch v. Enright Ref. Co., 751 F.2d 628,

633-634 (3d Cir. 1984)). 

When a defendant is a corporation, the alleged enterprise

“must be more than an association of individuals or entities

conducting the normal affairs” of that corporation. Brittingham,

943 F.2d at 301. In Brittingham, the plaintiffs brought a

section 1962(c) claim against Mobil Oil Corporation and its

subsidiary for misrepresenting the degradable qualities of a line

of trash bags. Id. at 299. The plaintiffs alleged an

association-in-fact enterprise consisting of Mobil, its

subsidiary, and the advertising agencies that they had hired to

45

Such a construction is consistent with the plaintiffs’

other allegation that the various elements of the association-infact function as a continuing unit to commit the scheme at issue,

as well as to earn money by providing financial planning and

investments to persons other than those who are similarly

situated to the plaintiffs. (Stein ¶ 246; Gilmour ¶ 189; Trimble

¶ 162; Treitz ¶ 185). The Court accordingly finds that the

plaintiffs have adequately pled the third and final essential

attribute of a RICO enterprise.

b. Conduct or Participation

A plaintiff bringing a section 1962(c) claim must not

only show that an enterprise exists, but that each defendant

conducted or participated in the conduct of the enterprise’s

affairs. The Supreme Court has interpreted the “conduct or 9

Case 2:05-md-01712-MAM Document 207 Filed 08/30/07 Page 49 of 96
promote the trash bags. Id. at 300. Following court-ordered

discovery on the limited issue of whether the plaintiffs could

demonstrate facts sufficient to sustain the RICO claim, the

district court granted the defendants’ motion for summary

judgment on the ground that the alleged enterprise was not

sufficiently distinct from the defendants. Id. at 300.

The Court of Appeals affirmed, reasoning that a corporation

must always act through its employees, agents, or affiliated

entities acting on its behalf. Id. at 301. Because the

plaintiffs had produced no evidence indicating that the defendant

corporations took a distinctive role in the alleged racketeering

activity, the court concluded that summary judgment was

appropriate. Id. at 303. The court reached this decision

despite the plaintiffs’ inclusion of Mobil’s advertising agencies

in the alleged enterprise because “[t]he advertising agencies

were defendants’ agents, and did no more than conduct the affairs

of the defendant corporations.” Id.

At various places in their pending motion, the Insurance

Company Group defendants suggest that the allegations of two of

the named plaintiffs in the Stein complaint –- the Inferreras and

Edwards –- fail the person-enterprise distinction because they do

not allege that a lawyer participated in their purchase of an

annuity. Without the participation of a lawyer, these defendants

argue, such plaintiffs allege an enterprise that consists of

nothing more than an association of the Insurance Company Group’s

agents and affiliated entities conducting the normal affairs of

the defendant corporations. 

The Court will not decide this issue because it concludes

below that these plaintiffs do not allege any predicate acts of

racketeering activity. The Court, therefore, will dismiss the

RICO claims of these plaintiffs on that ground.

46

participation” element to require a plaintiff to allege that a

defendant participated in the operation or management of the

enterprise itself. Reves v. Ernst & Young, 507 U.S. 170, 185

(1991); see also Univ. of Md. at Balt. v. Peat, Marwick, Main &

Co., 996 F.2d 1534, 1539 (3d Cir. 1993) (applying Reves in a

motion to dismiss context). 

Case 2:05-md-01712-MAM Document 207 Filed 08/30/07 Page 50 of 96
47

To conduct or participate in the conduct of an

enterprise’s affairs, a defendant must “have some part in

directing those affairs.” Reves, 507 U.S. at 179. The defendant

need not, however, hold a formal position within an enterprise to

“participate” in its affairs. United States v. Parise, 159 F.3d

790, 796 (3d Cir. 1998). Indeed, the “conduct or participation”

requirement “does not limit RICO liability to upper management

because ‘an enterprise is operated not just by upper management

but also by lower-rung participants in the enterprise who are

under the direction of upper management.’” Id. (quoting Reves,

507 U.S. at 184 (internal quotation marks omitted)). RICO

liability may therefore extend to those who knowingly further the

illegal aims of the enterprise by carrying out the directives of

those in control. United States v. Urban, 404 F.3d 754, 769-70

(3d Cir. 2005). In applying Reves, the United States Court of

Appeals for the Third Circuit has stated that RICO liability will

apply where there is “a nexus between the person and the conduct

in the affairs of an enterprise.” Id. at 770.

In the present case, attorneys Weinstein and Plaza

argue that the plaintiffs in Trimble and Treitz fail to allege

that Weinstein or Plaza participated in the operation or

management of the enterprise because these two attorneys did not

participate in the sale of annuities or legal services. 

According to these defendants, the plaintiffs allege that they

retained attorney Bohmueller, not Weinstein or Plaza, in

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48

connection with their purchase of living trusts. Bohmueller

therefore is the only attorney who could have participated in the

allegedly fraudulent scheme. 

The Court concludes that the plaintiffs in Trimble and

Treitz have adequately pled that attorneys Weinstein and Plaza

participated in the operation or management of the alleged

enterprise. The plaintiffs allege that Bohmueller, Weinstein,

and Plaza acted in concert to provide legal services to the

plaintiffs in connection with their purchase of annuities and

other estate planning instruments. (Trimble ¶ 31; Treitz ¶ 35). 

The plaintiffs further allege that Weinstein and Plaza did so

with the knowledge that these services were being rendered in

furtherance of the allegedly fraudulent sales scheme. (Trimble ¶

49; Treitz ¶ 59). As explained above, this provision of legal

services was integral to the allegedly fraudulent scheme, which

was developed and overseen by members of the Insurance Company

Group. (Trimble ¶ 177; Treitz ¶ 200). The plaintiffs in Trimble

and Treitz have therefore adequately pled that Weinstein and

Plaza “knowingly furthered the illegal aims of the enterprise by

carrying out the directives of those in control,” thereby

demonstrating the requisite nexus between these defendants and

the conduct of the affairs of the enterprise. See Urban, 404

F.3d at 769-70. 

Case 2:05-md-01712-MAM Document 207 Filed 08/30/07 Page 52 of 96
 The mail fraud statute, 18 U.S.C. § 1341, makes it a crime 10

to mail or cause to be delivered by mail any matter or thing for

the purpose of executing, or attempting to execute, any scheme or

artifice to defraud. The wire fraud statute, 18 U.S.C. § 1343,

makes it a crime to transmit or cause to be transmitted any

communication by wire, radio, or television in interstate or

foreign commerce for the purpose of executing any scheme or

artifice to defraud. Thus, the statutes cover in-state mailings,

but not in-state telephone calls. Annulli v. Panikkar, 200 F.3d

189, 200 n.9 (3d Cir. 1999). 

49

c. Racketeering Activity

To state a claim under § 1962(c), a plaintiff must

allege that the defendant conducted the alleged enterprise

through a “pattern of racketeering activity.” See Sedima, 473

U.S. at 496. A “pattern of racketeering activity” is defined as

the commission of at least two of the predicate offenses listed

in 18 U.S.C. § 1961(1) within a ten-year period. 18 U.S.C. §

1961(5). In the present case, the plaintiffs allege that the

defendants engaged in a pattern of mail and wire fraud, which are

among the “racketeering activities” enumerated in § 1961(1). 18

U.S.C. § 1961(1).

The federal mail and wire fraud statutes prohibit the

use of the mail or interstate wires for purposes of carrying out

any scheme or artifice to defraud. See 18 U.S.C. §§ 1341, 10

1343; see also Annulli v. Panikkar, 200 F.3d 189, 200 n.9 (3d

Cir. 1999). To state a claim for mail or wire fraud, a plaintiff

must therefore allege (i) a scheme to defraud, and (ii) use of

the mails or interstate wires in furtherance thereof. See United

States v. Pharis, 298 F.3d 228, 234 (3d Cir. 2002). 

Case 2:05-md-01712-MAM Document 207 Filed 08/30/07 Page 53 of 96
50

Furthermore, where, as here, a plaintiff relies on the

federal mail and wire fraud statutes as the basis for the alleged

RICO violation, the plaintiff’s allegations must comply with

Federal Rule of Civil Procedure 9(b). Lum, 361 F.3d at 223; Fed.

R. Civ. P. 9(b). Rule 9(b) requires a plaintiff to plead fraud

with particularity sufficient to place the defendants on notice

of the precise misconduct with which they are charged, and to

protect defendants from spurious charges of fraudulent behavior. 

Seville Indus. Mach. Corp. v. Southmost Mach. Corp., 742 F.2d

786, 791 (3d Cir. 1984). Allegations of date, place, and time

are adequate to satisfy the Rule, but nothing in the Rule

requires such specificity. Id. Instead, plaintiffs are free to

use alternative means of injecting precision and some measure of

substantiation into their allegations of fraud. Id. Until a

class is certified, a court must judge the adequacy of the fraud

allegations solely by reference to the allegations relating to

the named plaintiffs. Lum, 361 F.3d at 225 (citing Rolo v. City

Investing Co. Liquidating Trust, 155 F.3d 644, 659 (3d Cir.

1998)).

In the present case, the defendants argue that the

plaintiffs have failed to plead a pattern of racketeering

activity because (i) the plaintiffs’ allegations do not allege a

scheme to defraud, and (ii) the plaintiffs have failed to allege

with sufficient particularity the defendants’ use of the mail or

interstate wires in furtherance thereof. 

Case 2:05-md-01712-MAM Document 207 Filed 08/30/07 Page 54 of 96
 The defendants also argue that the Inferreras, Ryles, and 11

Edwards, in particular, fail to plead the scheme to defraud with

sufficient particularity because their allegations are too vague

to permit the Court to discern what alleged misrepresentations

and omissions were made to these plaintiffs in connection with

their annuity purchases. The Court will not decide this issue

because it concludes below that these plaintiffs do not allege

any use of the mails or interstate wires in connection with their

purchase of the Insurance Company Group’s annuities. The Court,

therefore, will dismiss the RICO claims of these plaintiffs on

that ground.

51

(1) Scheme to Defraud

A scheme to defraud “need not be fraudulent on its face

but must involve some sort of fraudulent misrepresentations or

omissions reasonably calculated to deceive persons of ordinary

prudence and comprehension.” United States v. Coyle, 63 F.3d

1239, 1243 (3d Cir. 1995). Noting that the federal mail and wire

fraud statutes have been “expansively construed,” the United

States Court of Appeals for the Third Circuit has stated that the

scheme need not involve affirmative misrepresentations. Kehr

Packages, Inc. v. Fidelcor, Inc., 926 F.2d 1406, 1415-16 (3d Cir.

1991). The court has stated, however, that the statutory term

“defraud” usually entails the deprivation of something of value

by “trick, deceit, chicane or overreaching.” Id.

In the present case, the defendants make two arguments

as to why the plaintiffs have failed to plead a scheme to

defraud. First, the defendants argue that there was no fraud 11

because the alleged misrepresentations or omissions of material

fact regarding the characteristics of the annuities were

Case 2:05-md-01712-MAM Document 207 Filed 08/30/07 Page 55 of 96
 During oral argument on the motions to dismiss, the 12

plaintiffs’ lead counsel asked the Court to ignore the

plaintiffs’ allegation that the defendants misrepresented the

suitability of the annuities in deciding whether the plaintiffs

had stated a claim under RICO. The plaintiffs do intend to rely

on this allegation when moving for class certification. The

plaintiffs’ lead counsel asked the Court to refrain from any

decision on whether representations about the suitability of the

annuities constitutes fraud until then. Tr. at 89-91.

52

contradicted or disclosed in the annuity contracts themselves. 

And second, the defendants contend that the alleged

misrepresentation about the annuities’ “suitability” for the

plaintiffs -- a misrepresentation that the plaintiffs contend

lies at the heart of this case -- constitutes a non-actionable

matter of opinion, rather than a fraudulent misrepresentation of

fact. Because the Court finds that the plaintiffs have

adequately pled a scheme to defraud regardless of whether

“suitability” is a misrepresentation of fact or a matter of

opinion, the Court will deny the plaintiffs’ motion to dismiss

without addressing the “suitability” issue.12

Contrary to the defendants’ contention, the plaintiffs

in the present litigation have adequately pleaded a scheme to

defraud despite the fact that many of the alleged

misrepresentations and omissions were contradicted or disclosed

in the annuity contracts themselves. According to the

plaintiffs, the scheme called for Sales Group members to gain the

trust of senior citizens by affirmatively misrepresenting

themselves as objective estate planning advisers, rather than

Case 2:05-md-01712-MAM Document 207 Filed 08/30/07 Page 56 of 96
53

commissioned salespeople. (Stein ¶¶ 14-17; Gilmour ¶¶ 174-78;

Trimble ¶¶ 147-51; Treitz ¶¶ 170-74). Having gained the trust of

senior citizens, often through visits to their homes, the Sales

Group members then allegedly misrepresented the benefits of

living trusts in order to convince senior citizens to purchase

the estate planning instruments. According to the plaintiffs,

instead of minimizing taxes and avoiding probate, the living

trusts did nothing more than offer the salespeople a convenient

way of identifying assets that could be used to purchase the

Insurance Company Group’s annuities. (Stein ¶¶ 251-58; Gilmour

¶¶ 196-202; Trimble ¶¶ 171-77; Treitz ¶¶ 194-200). 

Once the trust of these senior citizens was gained and

the available assets were identified, the Sales Group members

would then recommend that the senior citizens purchase one or

more of the Insurance Company Group’s annuities. (Stein ¶¶ 254-

58; Gilmour ¶¶ 199-203; Trimble ¶¶ 172-76; Treitz ¶¶ 195-99). In

the course of selling the annuities, the Sales Group members were

instructed to omit certain facts relating to the annuities,

including (i) that they were deferred (i.e., that the receipt of

monthly payments would be deferred), (ii) how long they would be

deferred, and (iii) the existence of surrender charges for early

capital withdrawals. (Stein ¶¶ 14, 254, 259; Gilmour ¶¶ 1, 2,

43; Trimble ¶¶ 2-6; Treitz ¶¶ 2-7). These omissions were

allegedly material because the annuities had deferral periods

that often extended into the plaintiffs’ nineties or beyond. 

Case 2:05-md-01712-MAM Document 207 Filed 08/30/07 Page 57 of 96
54

(Stein ¶¶ 108, 145, 165, 181, 193, 202-03, 206, 212; Gilmour ¶

163; Trimble ¶ 92; Treitz ¶ 106). 

The Court finds that such a scheme involved

misrepresentations and omissions that are reasonably calculated

to deceive persons of ordinary prudence and comprehension. See

Coyle, 63 F.3d at 1243. Simply having the plaintiffs sign

annuity contracts that contradict or disclose these alleged

misrepresentations is not enough to change that conclusion.

Indeed, the two district court cases that the

defendants cite to substantiate their argument that the annuity

contracts cured the effect of the Sales Group’s omissions and

misrepresentations are not on point. See Warden v. Crown Am.

Realty Trust, No. 96-25J, 1999 WL 476996 (W.D. Pa. July 6, 1999);

see also Knez Optical, Inc. v. Singer Optical Group, Inc., No.

94-7582, 1995 WL 649262 (E.D. Pa. Nov. 3, 1995). Warden was a

purported securities fraud class action where the court dismissed

a claim brought under section 10(b) of the Exchange Act because

the plaintiffs had failed to plead reasonable and justifiable

reliance. Warden, 1999 WL 476996, at *1. Such reasoning is

inapplicable to the case at hand because the Supreme Court has

specifically stated that justifiable reliance is not an element

of the federal mail or wire fraud statutes. Neder v. United

States, 527 U.S. 1, 24-25 (1999).

Knez is likewise inapplicable because it involves an

application of the parol evidence rule. Knez, 1995 WL 649262, at

Case 2:05-md-01712-MAM Document 207 Filed 08/30/07 Page 58 of 96
 In Rolo, 155 F.3d 644, the plaintiffs made “quite detailed” 13

allegations regarding the fraudulent scheme and described the

contents of the mailings in “reasonably specific terms.” Id. at

658. The court held, nevertheless, that the plaintiffs failed to

plead mail fraud with particularity because the complaint did not

specify “when, by whom, and to whom a mailing was sent, and the

precise content of each particular mailing.” Id. at 659. 

Similarly, in Warden v. McLelland, 288 F.3d 105 (3d Cir. 2002),

the complaint provided a “reasonably clear overall picture of

what had been alleged,” but did “not state clearly how [the

communications alleged to constitute wire fraud] were false or

misleading or how they contributed to the alleged fraudulent

scheme.” Id. at 114. The Court of Appeals instructed the

55

*4-*6. There, the district court dismissed the plaintiff’s RICO

claims based on federal mail and wire fraud because the parol

evidence rule barred the court from considering the alleged oral

misrepresentations at issue. Id. In the present litigation, the

defendants do not argue that the parol evidence rule bars the

court from considering the alleged misrepresentations and

omissions made by members of the Sales Group members.

The Court accordingly finds that the plaintiffs have

adequately pleaded a scheme to defraud for purposes of the

federal mail and wire fraud statutes.

(2) Use of the Mails or Wires

To state a claim for federal mail or wire fraud, a

plaintiff must also allege that the defendant used the mails or

interstate wires in furtherance of the scheme to defraud. See

Pharis, 298 F.3d at 234. Detailed allegations regarding the

fraudulent scheme overall are not a substitute for detailed

allegations about the acts of mail or wire fraud. See Warden v. 13

Case 2:05-md-01712-MAM Document 207 Filed 08/30/07 Page 59 of 96
district court to re-examine the complaint and permit the

plaintiffs to amend if appropriate. Id. 

56

McLelland, 288 F.3d 105, 114 (3d Cir. 2002); Rolo, 155 F.3d at

658-659. Mailings and wire communications do not have to be

fraudulent in and of themselves to come within the mail and wire

fraud statutes. Schmuck v. United States, 489 U.S. 705, 715

(1989). They do not even have to be an essential part of the

fraudulent scheme; they only need to be “incident to an essential

part of the scheme.” Id. at 709-10. Use of the mails or wires

even after money has been obtained through allegedly fraudulent

means may come within the statute if it serves to lull the

alleged victim into a false sense of security and prevent

detection. United States v. Sampson, 371 U.S. 75, 81 (1962).

The defendant does not have to send the mailing or wire

communication personally. A defendant may be liable where he or

she acts “with knowledge that the use of the mails will follow in

the ordinary course of business, or where such use can reasonably

be foreseen, even though not actually intended.” Pereira v.

United States, 347 U.S. 1, 8-9 (1954); United States v. Bentz, 21

F.3d 37, 40 (3d Cir. 1994). 

From these cases, the Court discerns the following

principle: to properly allege that a defendant committed an act

of mail or wire fraud, a plaintiff must allege facts from which

the Court can infer (i) that the defendant used the mails or

interstate wires as part of a scheme to defraud, or (ii) that the

Case 2:05-md-01712-MAM Document 207 Filed 08/30/07 Page 60 of 96
57

mails or interstate wires were used, and that the defendants took

some action whereby such use was reasonably foreseeable. Many of

the moving defendants argue that the allegations of certain

plaintiffs fail to comply with this requirement. The Court will

examine each of these defendants’ arguments in turn. 

(a) The Insurance Company Group

Defendants 

 

The Insurance Company Group defendants -- AAG, AILIC,

CMIC, IAMS, and AISG -- argue that the allegations of the Steins,

Inferreras, Gilmours, Trimbles, Brennans (Treitz), Lynch, Ryles,

Miller, and Edwards are deficient because these plaintiffs either

(i) fail to allege any use of the mails or interstate wires at

all, or (ii) fail to plead such use with particularity as

required by Rule 9(b). The Court agrees with the Insurance

Company Group’s contention that the Inferreras, Ryles, Miller,

and Edwards have failed to adequately plead mail or wire fraud. 

The Court finds, however, that the rest of the above-mentioned

plaintiffs have pled the requisite two predicate acts of mail and

wire fraud against the insurance companies.

According to the complaints, the Insurance Company

Group directed the affairs of the alleged association-in-fact,

which operated, at least in part, to execute an allegedly

fraudulent scheme to sell senior citizens unnecessary and

unsuitable estate planning instruments and annuities. (Stein ¶¶

247, 259; Gilmour ¶¶ 191, 205; Trimble ¶¶ 164, 178; Treitz ¶¶

Case 2:05-md-01712-MAM Document 207 Filed 08/30/07 Page 61 of 96
 The Steins: (i) Larson’s May 2002 mailing of the Steins’ 14

application to purchase an AILIC annuity to AmerUs; and (ii)

AmerUs’ December 2002 letter to the Steins regarding the

financial performance of AILIC and the valuation of the Steins’

annuity. (Stein ¶¶ 107, 114).

Lynch: (i) AmerUs’ April 2003 mailing of a policy amendment

to Lynch; (ii) AmerUs’ January 2004 letter to Lynch relating to

her AILIC annuity and the rates at which it could be renewed; and

(iii) AILIC and AAG’s January and March 2005 letters to Lynch

regarding certain aspects of her annuity. (Stein ¶¶ 130, 134,

271).

The Gilmours: (i) AILIC’s mailing of the Gilmours’ annuity

policies to Mr. Strope or Horowitz; and (ii) Mr. Strope or

Horowitz’s mailing of the signed annuity policies back to AILIC. 

(Gilmour ¶ 224).

The Trimbles: (i) AILIC’s mailing of the Trimbles’ annuity

policy to Spangler; and (ii) Spangler’s mailing of the signed

annuity policy back to AILIC. (Trimble ¶ 194).

The Brennans: (i) AILIC’s mailing of the Trimbles’ annuity

policy to Larson; and (ii) Larson’s mailing of the signed annuity

policy back to AILIC. (Treitz ¶ 194).

58

187, 201). The complaints describe, in varying detail, how this

scheme allegedly induced each plaintiff to purchase one or more

of the Insurance Company Group’s annuities. (Stein ¶¶ 98-218;

Gilmour ¶¶ 117-71; Trimble ¶¶ 82-144; Treitz ¶¶ 92-167). Within

these pleadings, the Steins, Gilmours, Trimbles, Brennans

(Treitz), and Lynch each identify at least two separate, specific

uses of the mails or wires that were incident to an essential

element of this scheme (i.e., the sale of the Insurance Company

Group’s annuities). (Id.) This use of the mails and interstate 14

wires was a reasonably foreseeable consequence of the Insurance

Company Group’s alleged conduct. These plaintiff’s allegations

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59

of federal mail and wire fraud against the Insurance Company are

therefore sufficient to withstand the instant motion to dismiss.

See Schmuck, 489 U.S. at 715.

The allegations of the Inferreras, Ryles, Miller, and

Edwards, however, fail to plead any predicate acts of mail or

wire fraud. The Inferreras, Ryles, and Edwards do not allege any

use of the mails or interstate wires at all in connection with

their purchase of the Insurance Company Group’s annuities. 

(Stein ¶¶ 174-82, 201-09). And although Miller does allege the

use of the mail or interstate wires in connection with his

purchase of an annuity, this use appears to relate to his

purchase of an annuity from American Equity, a corporation that

is neither a defendant in this litigation nor related in any way

to the Insurance Company Group defendants. (Stein ¶¶ 183-200). 

The Court will accordingly dismiss these plaintiffs’ RICO claims. 

(b) Bohmueller

Bohmueller argues that the plaintiffs in the Gilmour,

Trimble, and Treitz actions have failed to adequately plead that

he used the mails or interstate wires in furtherance of the

alleged scheme to defraud. According to Bohmueller, these

plaintiffs either do not allege that the attorney used the mails

or interstate wires at all, or they fail to explain how the

attorney’s use of the mails or interstate wires furthered the

allegedly fraudulent scheme. 

Case 2:05-md-01712-MAM Document 207 Filed 08/30/07 Page 63 of 96
 The Gilmours: (i) AILIC’s mailing of the Gilmours’ annuity 15

policies to Mr. Strope or Horowitz; and (ii) Mr. Strope or

Horowitz’s mailing of the signed annuity policies back to AILIC. 

(Gilmour ¶ 224).

The Trimbles: (i) AILIC’s mailing of the Trimbles’ annuity

policy to Spangler; and (ii) Spangler’s mailing of the signed

annuity policy back to AILIC. (Trimble ¶ 194).

The Brennans: (i) AILIC’s mailing of the Trimbles’ annuity

policy to Larson; and (ii) Larson’s mailing of the signed annuity

policy back to AILIC. (Treitz ¶ 194).

60

According to the complaints, Bohmueller participated in

the allegedly fraudulent scheme to sell the Insurance Company

Group’s annuities by, among other things, knowingly allowing

Sales Group members to use the living-trust creation process as a

way of identifying assets that could be used to purchase

annuities. (Gilmour ¶¶ 196-201; Trimble ¶¶ 169-74; Treitz ¶¶ 192-

97). Bohmueller’s involvement in the scheme as it relates to the

plaintiffs in Gilmour, Trimble, and Treitz is evidenced by the

alleged fact that these plaintiffs all purchased living trusts by

checks made payable to “Bohmueller Law Offices.” (Gilmour ¶ 129;

Trimble ¶ 93; Treitz ¶ 101). These plaintiffs have each

identified at least two separate, specific uses of the mails or

wires that were incident to their purchase of the Insurance

Company Group’s annuities (an essential element of the scheme to

defraud). These uses of the mails or interstate wires were a 15

reasonably foreseeable consequence of Bohmueller’s actions, which

helped facilitate the allegedly fraudulent annuity sales. These

plaintiffs’ allegations of federal mail and wire fraud against

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61

Bohmueller are therefore sufficient to withstand his motion to

dismiss. 

(c) Weinstein and Plaza

Attorney defendants Weinstein and Plaza argue that the

plaintiffs in Trimble and Treitz have failed to allege that

either attorney committed the requisite predicate acts of mail or

wire fraud. Weinstein contends that the allegations of mail and

wire fraud in Trimble are too vague to satisfy the requirements

of Rule 9(b), and both Weinstein and Plaza argue that the

allegations in Treitz are deficient because (i) they are too

vague, and (ii) they refer to the conduct of attorney Bohmueller,

not the conduct of Weinstein or Plaza. 

The plaintiff in Trimble alleges that Weinstein was

partners with Bohmueller and acted in concert with Bohmueller to

provide the Trimbles with legal services, including the

preparation of the Trimbles’ living trust. (Trimble ¶¶ 29-32). 

The plaintiff in Treitz likewise alleges that Weinstein and Plaza

acted in concert with Bohmueller to provide legal services to the

Brennans, including the preparation of the Brennans’ living

trust. (Treitz ¶¶ 31-36). As explained above, it was reasonably

foreseeable that this conduct in furtherance of the alleged

scheme to defraud would lead to the use of the mails or

interstate wires. The plaintiffs in Treitz and Trimble have

Case 2:05-md-01712-MAM Document 207 Filed 08/30/07 Page 65 of 96
62

therefore adequately alleged that Weinstein and Plaza committed

the requisite acts of mail or wire fraud.

(d) The Patriot Group

The Patriot Group argues that the plaintiff in Gilmour

has failed to adequately plead that the Patriot Group committed

the requisite predicate acts of federal mail or wire fraud. 

According to this defendant, the Gilmour plaintiff’s allegations

of mail and wire fraud (i) are too vague to satisfy Rule 9(b),

and (ii) fail to specify how the Patriot Group’s use of the mails

or interstate wires furthered the alleged scheme to defraud. 

The plaintiff in Gilmour has alleged numerous specific

instances of the Patriot Group’s use of the mail or interstate

wires in furtherance of the alleged scheme to defraud. For

example, the plaintiff alleges that in May of 2001, the Patriot

Group, through its sales agent Mr. Strope, mailed the Gilmours’

AILIC annuity applications from the Patriot Group’s Pennsylvania

office to AILIC’s Kansas office. (Gilmour Amended RICO Case

Statement No. 4(ff)(1)). The plaintiff also alleges that on June

29, 2001, the Patriot Group, through Mr. Strope, mailed the

Gilmours’ signed policy delivery receipt from the Patriot Group’s

Pennsylvania office to AILIC. (Gilmour Amended RICO Case

Statement No. 4(ff)(21)). Although these mailings are not

fraudulent in and of themselves, they were done incident to an

essential part of the scheme (i.e., the sale of the Insurance

Case 2:05-md-01712-MAM Document 207 Filed 08/30/07 Page 66 of 96
63

Company Group’s annuities). The Court therefore finds that the

plaintiff in Gilmour has alleged that the Patriot Group

participated in the requisite predicate acts of mail or wire

fraud. See Schmuck, 489 U.S. at 709-10, 715.

(3) Injury to Business or Property

A plaintiff has standing to bring a RICO claim if, and

can recover only to the extent that, he has been injured in his

business or property by the conduct constituting the violation.

Sedima, 473 U.S. at 496. As explained by the United States Court

of Appeals for the Third Circuit, this “injury to business or

property” element of a RICO claim requires the plaintiff to plead

a concrete financial loss and not mere injury to a valuable,

intangible property interest. See Maio v. Aetna, Inc., 221 F.3d

472, 483 (3d Cir. 2000). 

The defendants argue that the plaintiffs lack standing

to bring a RICO claim because they have failed to allege any

concrete financial loss. According to the defendants, the

plaintiffs’ alleged injury -- that they were fraudulently induced

to purchase annuities whose undisclosed deferral periods and

surrender charges tied up their money and deprived them of

current income -- is not the type of concrete financial loss that

RICO’s standing requirement demands. 

As a preliminary matter, this argument ignores the

alleged fact that most of the plaintiffs were fraudulently

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64

induced to purchase living trusts for which they had no actual

use. This payment of between $600 and $2,000 for a useless

estate planning instrument constitutes the type of actual

monetary loss that is sufficient to satisfy RICO’s injury

requirement. See Maio, 221 F.3d at 483-84. By virtue of this

allegation alone, the Steins, Prices, Gilmours, Trimbles,

Brennans (Treitz), Lynch, Healy, Ryles, and Miller have standing

to bring RICO claims. (Stein ¶¶ 105, 125, 140, 163, 179, 191,

259; Gilmour ¶¶ 129, 205; Trimble ¶¶ 93, 178; Treitz ¶¶ 101,

201).

More importantly, the plaintiffs’ allegation that they

were fraudulently induced to purchase annuities that had

undisclosed deferral periods and surrender charges does, in fact,

constitute the type of concrete financial loss that is sufficient

to confer standing under RICO. 

In Maio, the plaintiffs alleged that the defendant,

Aetna, engaged in a fraudulent scheme to induce individuals to

purchase their health insurance by, among other things,

representing that its insureds would receive “high quality”

health care from physicians. Maio, 221 F.3d at 474-78. In

reality, Aetna’s internal policies restricted the physicians’

ability to provide the health care that the plaintiffs were

promised. Id. at 474-79. The plaintiffs claimed that their

injury consisted of the difference in value between the “high

quality” health insurance promised and the “inferior” health

Case 2:05-md-01712-MAM Document 207 Filed 08/30/07 Page 68 of 96
65

insurance actually received. Id. at 486. The plaintiffs did not

allege that they suffered any personal injuries, were denied

necessary benefits, or received inferior care. Id. at 485. 

According to the plaintiffs, their financial loss was not

dependant upon individualized allegations concerning the level or

adequacy of the care that each plaintiff received under Aetna’s

plan. Id. at 487. Rather, the plaintiffs’ injury consisted

solely of the financial losses that they incurred by paying too

much for their enrollment in Aetna’s “inferior” health plan. Id.

at 485. 

The Court of Appeals rejected this theory, holding that

the plaintiffs could not establish that they suffered a tangible

economic harm compensable under RICO. Id. at 488. According to

the court, absent allegations that Aetna failed to provide

sufficient health insurance coverage in the sense that their

insureds received inadequate, inferior, or delayed medical

treatment, there was no factual basis for the plaintiffs’

allegation that they had been injured in their “property” because

the health insurance they received was inferior, and therefore

worth less, than what they paid for it. Id. 

The Court reached this conclusion because the

plaintiffs’ property interest in their health insurance coverage

took the form of a contractual right to receive a certain level

of benefits from Aetna. Id. at 490. The contours of this

contractual right was defined by the parties’ contractual

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66

agreement as well as Aetna’s extra-contractual promise to provide

“high quality” health care. Id. at 491. It inexorably followed,

the court reasoned, that the plaintiffs could not establish a

RICO injury absent proof that Aetna failed to perform under the

parties’ arrangement. Id. at 490.

In the present case, the plaintiffs allege that they

were injured in connection with their purchase of the Insurance

Company Group’s annuities. (Stein ¶ 273, Gilmour ¶ 228; Trimble

¶ 198; Treitz ¶ 221). These annuities, like the health insurance

policies in Maio, took the form of contractual rights to receive

certain benefits. (Stein ¶ 62). To establish a RICO injury, the

plaintiffs must therefore allege that the defendants failed to

perform under the parties’ arrangement. Maio, 221 F.3d at 490. 

The plaintiffs have alleged such a failure to perform.

According to the complaints, the Sales Group members

induced the plaintiffs to purchase the annuities without

disclosing that the annuities contained deferral periods and

surrender charges. (Stein ¶¶ 109, 127-28, 146-47, 149-50, 166,

174, 183, 193-94, 205-06, 216-17; Gilmour ¶ 134; Trimble ¶ 95;

Treitz ¶ 107). The plaintiffs’ injury therefore consists of the

difference in value between the annuities that they were promised

(those without deferral periods and surrender charges) and the

annuities that they actually received (those with deferral

periods and surrender charges). 

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67

Although this damages theory appears similar to that

which was posited by the plaintiffs in Maio, it contains one

critical difference. In Maio, the contracts at issue were for

the provision of “high quality” health care services. Maio, 221

F.3d at 485. According to the court, the plaintiffs failed to

plead a RICO injury because the plaintiffs did not allege that

they had actually received health care that was inferior to that

which they were promised. Id. at 488. Here, on the other hand,

the contracts at issue were for the right to collect future

payments, as well as the right to convert their contracts back

into cash. (Stein ¶¶ 62-67). These rights were impaired by the

undisclosed deferral periods and surrender charges. The

plaintiffs in the present litigation have alleged that they

actually received less than what they were promised. 

The plaintiffs therefore have standing under RICO and

may recover to the extent that they were harmed by the

undisclosed deferral periods and surrender charges. Sedima, 473

U.S. at 496.

2. Claim Under Section 1962(d)

The defendants argue that the plaintiffs’ RICO

conspiracy claim under 18 U.S.C. § 1962(d) should be dismissed

because the plaintiffs have failed to plead an underlying

violation of section 1962(c).

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68

To state a RICO conspiracy claim under section 1962(d),

a plaintiff must allege (i) an agreement to commit the predicate

acts of fraud, and (ii) knowledge that those acts were part of a

pattern of racketeering activity conducted in such a way as to

violate section 1962(a), (b), or (c). Rose v. Bartle, 871 F.2d

331, 366 (3d Cir. 1989). A section 1962(d) claim cannot be

pursued where there is no cognizable RICO enterprise or pattern

of racketeering activity alleged by the defendant or coconspirators. See Lum, 361 F.3d at 227 n.5 (“Any claim under

section 1962(d) based on conspiracy to violate the other

subsections of section 1962 must fail if the substantive claims

are themselves deficient.”).

 In the present case, the Court has dismissed the

section 1962(c) claims of the Inferreras, Ryles, Miller, and

Edwards because these plaintiffs have failed to plead the

requisite pattern of racketeering activity. The Court will

accordingly dismiss their claims under 1962(d), as well. Because

the Court has concluded that the rest of the plaintiffs have

stated valid RICO claims under section 1962(c), it will deny the

defendants’ motion to dismiss their RICO conspiracy claims.

3. Whether the McCarron-Ferguson Act Bars the

Plaintiffs’ RICO Claims 

The defendants argue that the McCarron-Ferguson Act, 15

U.S.C. §§ 1011, et seq., bars the plaintiffs’ RICO claims insofar

as these claims are based on allegations that the annuities are

Case 2:05-md-01712-MAM Document 207 Filed 08/30/07 Page 72 of 96
 Although neither the Supreme Court nor the United States 16

Court of Appeals for the Third Circuit has explicitly ruled on

the issue, it appears that in MDL proceedings the transferee

court applies the choice-of-law rules that would govern in the

transferor forum. Smith v. Waste Mgmt., Inc., 407 F.3d 381, 384

n.1 (5th Cir. 2005); In re Rezulin Prod. Liab. Litig., 392 F.

Supp. 2d 597, 606 (S.D.N.Y. 2005); In re Diet Drugs Prod. Liab.

Litig., MDL-1203, No. 03-20284, 2004 WL 1925010, at *1 (E.D. Pa.

Aug. 30, 2004). 

In this case, suits brought by the Inferreras and Edwards

were transferred to this Court from California and Florida,

respectively. The Court must therefore apply the choice-of-law

rules from California and Florida to determine which state’s laws

govern these claims. In addition, the Court must look at

Pennsylvania’s choice-of-law rules to determine which state’s

laws govern the rest of the plaintiffs’ claims, all of which are

contained in complaints that were originally filed in this Court.

The Court finds that the choice-of-law rules of

Pennsylvania, Florida, and California all require application of

the laws of the jurisdictions where the transactions, misconduct,

and injuries allegedly occurred. See Huber v. Taylor, 469 F.3d

67, 74-81 (3d Cir. 2006); see also Trumpet Vine Inv., N.V. v.

Union Capital Partners I, Inc., 92 F.3d 1110, 1116 (11th Cir.

1996); Waggoner v. Snow, Becker, Kroll, Klaris & Krauss, 991 F.2d

1501, 1508 (9th Cir. 1993). In this case, those states are

Pennsylvania, Florida, and California.

Before a choice-of-law question arises, however, there must

first be a true conflict between the potentially applicable

bodies of law. Huber, 469 F.3d at 74. If there is no conflict,

then the district court may refer interchangeably to the laws of

the states whose laws potentially apply. Id. In the present

case, the parties do not argue, and the Court does not find, that

there is a true conflict between the laws of Pennsylvania,

Florida, and California with regard to breach of fiduciary duty,

69

per se unsuitable and fraudulently designed. Because the Court

has declined to address the plaintiffs’ allegations of per se

unsuitability in this opinion, the Court will not address this

argument. 

C. State Law Claims16

Case 2:05-md-01712-MAM Document 207 Filed 08/30/07 Page 73 of 96
negligence, or unjust enrichment (the only state law claims

alleged by the Inferreras and Edwards). See, e.g., eToll, Inc.

v. Elias/Savion Adver., Inc., 811 A.2d 10, 22 (Pa. Super. Ct.

2002) (discussing the requirements for the establishment of a

fact-specific fiduciary duty); City Solutions, Inc. v. Clear

Channel Commc’ns, Inc., 201 F. Supp. 2d 1048, 1050 (N.D. Cal.

2002); see also Lanz v. Resolution Trust Corp., 764 F. Supp. 176,

179 (S.D. Fla. 1991) (same);.

The Court will therefore refer to these states’ laws

interchangeably in addressing these claims.

70

1. Statute of Limitations

The Insurance Company Group defendants, the EPAC

defendants (EPAC, Larson, Mr. Strope, and Krygowski), and

Bohmueller argue that many of the plaintiffs’ tort claims against

them are barred by Pennsylvania’s two-year statute of limitations

on such causes of action. These plaintiffs respond by arguing

that their tort claims are timely because the delayed discovery

doctrine tolls the applicable statute of limitations.

Although ordinarily treated as an affirmative defense,

failure to comply with the applicable statute of limitations may

be raised on a motion to dismiss where the allegations made on

the face of the complaint show that the cause of action is timebarred. Benak v. Alliance Capital Mgmt., L.P., 435 F.3d 396, 400

n.14 (3d Cir. 2006). In Pennsylvania, tort claims are subject to

a two-year statute of limitations. 42 Pa. Cons. Stat. § 5524(7)

(2004). This limitations period begins to run as soon as the

right to institute and maintain a suit arises, which, as a

general rule, is when the injury was inflicted. Drelles v. Mfrs.

Case 2:05-md-01712-MAM Document 207 Filed 08/30/07 Page 74 of 96
71

Life Ins. Co., 881 A.2d 822, 831 (Pa. Super. Ct. 2005). Mistake,

misunderstanding, or lack of knowledge in themselves do not toll

the running of the statute. See Pocono Int’l Raceway, Inc. v.

Pocono Produce, Inc., 468 A.2d 468, 471 (Pa. 1983). 

The delayed discovery doctrine is an exception to the

general rule that a cause of action begins to run at the time of

injury. Id. This doctrine excludes from consideration the time

during which a party who has not suffered an immediately

ascertainable injury remains “reasonably unaware” of the facts

and circumstances surrounding his claim. Drelles, 881 A.2d at

831. The key point that gives rise to the doctrine’s application

is the inability of the injured party, despite the exercise of

“reasonable diligence,” to know that he has been injured and by

what cause. Id. Although the test for “reasonable diligence” is

objective, “[i]t is sufficiently flexible to take into account

the differences between persons and their capacity to meet

certain situations and the circumstances confronting them at the

time in question.” Fine v. Checcio, 870 A.2d 850, 858 (Pa.

2005). Because this inquiry is “fact-driven,” the determination

of whether an individual plaintiff has exercised “reasonable

diligence” is ordinarily left to the jury. See id.

In the present case, the Insurance Company Group

defendants, the EPAC defendants (EPAC, Larson, Mr. Strope, and

Krygowski), and Bohmueller argue that the statute of limitations

on the plaintiffs’ tort claims against them began running on the

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72

date the plaintiffs purchased their annuities. On that date,

each plaintiff received his or her annuity contract, which

allegedly contradicted or disclosed all the alleged

misrepresentations and omissions that induced the plaintiff to

purchase the annuities. According to these defendants, the tort

claims of the Steins, Prices, Gilmours, Trimbles, Brennans

(Treitz), Lynch, and Healy should be dismissed because more than

two years elapsed between their annuity purchase and the date on

which they filed suit.

The Court finds that the complaints, on their face, do

not show that these plaintiffs’ claims are time-barred. Although

more than two years passed between the date on which these

plaintiffs purchased their annuities (and therefore received

their annuity contracts) and the date on which they filed suit,

it is unclear whether these plaintiffs failed to exercise

“reasonable diligence” in apprising themselves of their claims.

The complaints allege that the Sales Group members gained these

plaintiffs’ trust so that the plaintiffs would rely solely upon

their representations (and omissions) when deciding whether to

purchase an annuity. (Stein ¶¶ 14-23; Gilmour ¶¶ 194-99; Trimble

¶¶ 167-73; Treitz ¶¶ 190-96). Furthermore, the complaints allege

that even if these plaintiffs had tried to read the annuity

contract, the contracts themselves were so complex that they were

insufficient to apprise these plaintiffs of their claims. (Stein

¶¶ 11, 69-71; Gilmour ¶ 165). 

Case 2:05-md-01712-MAM Document 207 Filed 08/30/07 Page 76 of 96
73

The Court therefore will not dismiss these plaintiffs’

tort claims on the ground that they are time-barred.

2. Breach of Fiduciary Duty

The Insurance Company defendants, EPAC defendants

(EPAC, Larson, Mr. Strope, and Krygowski), and Attorney Group

defendants (Bohmueller, Weinstein, and Plaza) argue that the

plaintiffs’ claims against them for breach of fiduciary duty

should be dismissed because the plaintiffs have failed to plead

the existence of a fiduciary relationship. The plaintiffs

respond by arguing that a fiduciary relationship arose from the

relationship of trust that the Sales Group members created in

connection with the allegedly fraudulent sales scheme. The

plaintiffs further allege that any breach of this fiduciary

relationship is attributable to both the Insurance Company Group

defendants and the Attorney Group defendants because the

salespeople were acting on their behalf.

A fiduciary relationship may arise “where by virtue of

the respective strength and weakness of the parties, one has a

power to take advantage of or exercise undue influence over the

other.” eToll, Inc. v. Elias/Savion Adver., Inc., 811 A.2d 10,

22 (Pa. Super. Ct. 2002). The critical question in determining

whether such a relationship exists is whether the relationship

goes beyond mere reliance on superior skill and into a

relationship characterized by “overmastering influence” on one

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74

side or “weakness, dependence, or trust, justifiably reposed,” on

the other. Id. at 23 (citing Basile v. H & R Block, 777 A.2d 95,

101 (Pa. Super. Ct. 2001)). Such a relationship may arise, for

example, when one occupies toward another a position of adviser

or counselor. Basile, 777 A.2d at 102. Individuals who purport

to give business advice “may engender confidential relations if

others, by virtue of their own weakness or inability, the

adviser’s pretense or expertise, or a combination of both, invest

such a level of trust that they seek no other counsel.” Id. Any

breaches of this duty by an agent may be attributed to his

principal, so long as the agent is acting within the scope of his

agency. See Aiello v. Ed Saxe Real Estate, Inc., 499 A.2d 282,

285 (Pa. 1985).

In the present case, the plaintiffs allege that the

members of the Sales Group, acting on behalf of the Insurance

Company Group and the Attorney Group, held themselves out at all

times as experts in estate planning and as associates of lawyers. 

The sales agents further gained the trust of the defendants by

conferring on themselves imaginary titles, such as “Certified

Elder Adviser.” (Stein ¶¶ 14-23; Gilmour ¶¶ 194-200; Trimble ¶¶

167-73; Treitz ¶¶ 190-96). With their true identities cloaked,

the Sales Group members then conducted informational

presentations, often followed by in-home visits, where the

salespeople ostensibly offered the plaintiffs disinterested

financial advice. (Id.) At these presentations and in-home

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75

visits, the Sales Group members recommended that the plaintiffs,

all of whom were senior citizens, use any available assets to

purchase annuities. (Stein ¶¶ 108, 145, 165, 181, 193, 202-03,

206, 212, 254-58; Gilmour ¶¶ 163, 199-203; Trimble ¶¶ 92, 172-76;

Treitz ¶¶ 106, 195-99). The Court finds that these allegations

are sufficient to plead the existence of a fiduciary

relationship.

3. Negligent Supervision

The Insurance Company Group defendants, Weinstein, and

Plaza argue that the plaintiffs’ claims against them for

negligent supervision should be dismissed because (i) the

plaintiffs have failed to plead the elements of a negligent

supervision claim, (ii) the plaintiffs cannot predicate a

negligence claim on suitability, and (iii) the economic loss

doctrine bars the plaintiffs’ claims.

A claim for negligent supervision provides a remedy for

injuries to third parties who would otherwise be foreclosed from

recovery under the principal-agent doctrine of respondeat

superior because the wrongful acts of employees in these cases

are likely to be outside the scope of employment or not in

furtherance of the principal’s business. Heller v. Patwil Homes,

Inc., 713 A.2d 105, 107 (Pa. Super. Ct. 1998); see also IRPC,

Inc. v. Hudson United Bancorp., No. 0474, 2002 WL 372945, at *4

(Pa. Com. Pl. Jan. 18, 2002) (noting that an employee acting

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76

outside the scope of his employment is an element of a claim for

negligent supervision).

In the present case, the plaintiffs have alleged

throughout their complaints that the Sales Group members were

acting under the direction of the Insurance Company Group and

Attorney Group to further the allegedly fraudulent scheme. 

(Stein ¶¶ 14-16, 250; Gilmour ¶ 194; Trimble ¶ 167; Treitz ¶

190). Nowhere in the complaints do the plaintiffs allege that

the Sales Group members were acting outside the scope of their

agency. The Court will accordingly dismiss the plaintiffs’

claims against the Insurance Company Group defendants, Weinstein,

and Plaza for negligent supervision.

4. Unjust Enrichment

To state a claim for unjust enrichment, a plaintiff

must allege (i) that the plaintiff conferred a benefit on the

defendant, (ii) that the defendant appreciated the benefit, and

(iii) that the defendant accepted and retained the benefit under

circumstances such that it would be inequitable for defendant to

retain the benefit without payment of value. Mitchell v. Moore,

729 A.2d 1200, 1202 (Pa. Super. 1999). A claim for unjust

enrichment is defeated by the existence of an enforceable and

binding contract. Schott v. Westinghouse Elec. Corp., 259 A.2d

443, 448 (Pa. 1969); see also Matter of Penn Ctr. Transp. Co.,

831 F.2d 1221, 1230 (3d Cir. 1987) (finding that a plaintiff

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 In contrast to the Stein plaintiffs, the plaintiffs in 17

Gilmour, Trimble, and Treitz do not contest the validity of the

annuity contracts.

77

cannot maintain a claim of unjust enrichment when an express

contract existed on the same subject). A plaintiff may, however,

plead in the alternative when the validity of a contract is in

question. See Indep. Enter. Inc. v. Pittsburgh Water & Sewer

Auth., 103 F.3d 1165, 1175 (3d Cir. 1997).

The Insurance Company Group defendants and the EPAC

defendants (EPAC, Larson, Mr. Strope, and Krygowski) argue that

the plaintiffs’ claims against them for unjust enrichment should

be dismissed because the parties’ relationships are governed by

the annuity contracts. The plaintiffs in the Stein class action

complaint respond by arguing that their claims for unjust

enrichment should not be dismissed because the annuity contracts

were procured by fraud and may therefore be invalid. This

argument is consistent with these plaintiffs’ prayer for relief,

which seeks a return of all amounts paid for the defendants’

products. (Stein ¶ 300b). Because these plaintiffs challenge

the enforceability of the annuity contracts, the Court will not

dismiss their claim for unjust enrichment at this time. 

The plaintiffs in the Gilmour, Brennan, and Treitz

individual actions argue that their claims for unjust enrichment

should not be dismissed because the claims are pled in the

alternative to their breach of contract claims. These 17

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plaintiffs’ breach of contract claims arise from an alleged

promise made by members of the Sales Group, on behalf of the

Insurance Company Group defendants, to provide these plaintiffs

with estate planning services. As will be discussed more fully

below, these plaintiffs have failed to state a claim for breach

of contract. The Gilmour, Trimble, and Treitz plaintiffs,

however, have failed to plead that they conferred any benefit on

the Insurance Company Group or EPAC defendants in exchange for

this promise to provide estate planning services. Indeed, the

only benefits that these plaintiffs allegedly conferred on the

insurance companies and salespeople were payments made in

connection with the plaintiffs’ purchases of annuities. The

plaintiffs’ relationship with these defendants is therefore

governed by the annuity contracts. The Court will accordingly

dismiss the Gilmour, Trimble, and Treitz plaintiffs’ claims for

unjust enrichment against the Insurance Company Group and EPAC

defendants.

Weinstein and Plaza argue that the claims against them

for unjust enrichment should be dismissed because the plaintiffs

have failed to plead that the attorneys conferred a benefit on

them. The plaintiffs respond by pointing to their allegations

that these attorneys acted in concert with, and shared fees with,

attorney Bohmueller, who received money from the plaintiffs in

connection with their purchase of living trusts. (Trimble ¶¶ 29-

32; Treitz ¶¶ 31-36). The Court finds that this allegation is

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sufficient to demonstrate that the plaintiffs conferred a benefit

on Weinstein and Plaza. The Court will accordingly deny these

defendants’ motion on this ground.

5. Fraudulent Misrepresentation and Negligent

Misrepresentation 

The Insurance Company Group defendants, EPAC defendants

(EPAC, Larson, Mr. Strope, and Krygowski), Weinstein, and Plaza

argue that the plaintiffs’ claims against them for fraudulent and

negligent misrepresentation should be dismissed because the

plaintiffs (i) have failed to plead justifiable reliance on the

alleged misrepresentations, and (ii) have failed to plead these

claims with the particularity required by Rule 9(b). 

To state a claim for either fraudulent or negligent

misrepresentation, a plaintiff must plead justifiable reliance. 

See Bortz v. Noon, 729 A.2d 555, 560-61 (Pa. 1999) (listing the

essential elements of both fraudulent and negligent

misrepresentation). To be justifiable, reliance upon the

representation of another must be reasonable. Porreco v.

Porreco, 811 A.2d 566, 571 (Pa. 2002). This “reasonableness” may

be affected by the nature of the relationship between the

parties.

Claims for fraudulent misrepresentation must meet the

heightened pleading standard set forth in Federal Rule 9(b). 

Although Rule 9(b) does not govern claims of negligent

misrepresentation, district courts in this circuit have generally

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required “a degree of specificity.” See, e.g., Floyd v. Brown &

Williamson Tobacco Corp., 159 F. Supp. 2d 823, 834 (E.D. Pa.

2001); see also S. Ocean Seafood Co. v. Holt Cargo Sys., Inc.,

No. 96-5217, 1997 WL 539763, at *11 n.23 (E.D. Pa. Aug. 11,

1997). The United States Court of Appeals for the Third Circuit

has cautioned that in applying Rule 9(b) pleading requirements,

courts should be sensitive to the fact that an overly stringent

application of the Rule “may permit sophisticated defrauders to

successfully conceal the details of their fraud.” See Shapiro v.

UJB Fin. Corp., 964 F.2d 272, 284 (3d Cir. 1992).

Pennsylvania has adopted the Restatement (Second) of

Agency regarding the liability of a principal for the tortious

misrepresentations of his agents. Bolus v. United Penn Bank, 525

A.2d 1215, 1223-24 (Pa. Super. Ct. 1987). Under the Restatement,

“[a] principal is subject to liability for loss caused to another

by the other’s reliance upon a tortious representation of a

servant or other agent, if the representation is: (a) authorized;

(b) apparently authorized; or (c) within the power of the agent

to make for the principal.” Id. (quoting the Restatement

(Second) of Agency § 257 (1958)).

In the present case, the Court has already concluded

that the plaintiffs in the individual actions state a claim under

RICO. This conclusion applies equally to the Rule 9(b) arugment

here. As to justifiable reliance, the plaintiffs adequately

allege such reliance, that is usually a jury question.

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81

6. Civil Conspiracy

The plaintiffs in the individual actions have alleged

civil conspiracy. The Insurance Company Group defendants and

Weinstein and Plaza have moved to dismiss. The Court will deny

the motions.

In order to state a claim for conspiracy under

Pennsylvania law, a plaintiff must allege: “(1) a combination of

two or more persons acting with a common purpose to do an

unlawful act or to do a lawful act by unlawful means or for an

unlawful purpose; (2) an overt act done in pursuance of the

common purpose; and (3) actual legal damage.” McKeeman v.

Corestates Bank, N.A., 751 A.2d 655, 660 (Pa. Super. Ct. 2000)

(citations omitted).

As set out above in the section addressing the adequacy

of the RICO allegations, the complaint contains sufficient

allegations to fulfill the three essential elements of a

conspiracy claim.

7. Professional Negligence

The attorney defendants argue that the plaintiffs’

professional negligence claims against them in the individual

actions should be dismissed because the attorney defendants never

entered into any professional relationship with the plaintiffs. 

The plaintiffs respond that the attorney defendants directly

performed estate planning services for the plaintiffs.

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Under Pennsylvania law, clients may bring tort actions

against professionals who do not provide the client with services

consistent with the standard expected of the profession. 

Professional negligence actions can be maintained only against

persons licensed in Pennsylvania or another state as: (1) health

care providers are defined in 40 Pa. Cons. Stat. § 1303.503; (2)

accountants; (3) architects; (4) chiropractors; (5) dentists; (6)

engineers or land surveyors; (7) nurses; (8) optometrists; (9)

pharmacists; (10) physical therapists; (11) psychologists; (12)

veterinarians; or (13) attorneys. Pa. R. Civ. P. 1042.1. The

elements of a professional negligence claim against an attorney

are: 1) employment of the attorney or other basis for duty; 2)

the failure of the attorney to exercise ordinary skill and

knowledge; and 3) that such failure proximately caused damage to

the plaintiff. Kituskie v. Corbman, 714 A.2d 1027, 1030 (1998). 

Here, the plaintiffs allege that the attorney

defendants provided them with legal advice and owed them common

law duties to provide competent, knowledgeable legal

representation. (Gilmour ¶¶ 262-63; Trimble ¶¶ 233-34; Treitz ¶¶

245-46). The plaintiffs claim that attorney defendants breached

those duties by failing to consult with plaintiffs, failing to

adequately review investment vehicles, and failing to disclose

the relationships between the attorney defendants and the other

defendants, among other allegations. (Gilmour ¶ 265; Trimble ¶

236; Treitz ¶ 248). The plaintiffs claim that they suffered

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83

damages due to the professional negligence of the attorney

defendants. The Court finds that these allegations are

sufficient to plead professional negligence against the attorney

defendants. 

Defendant Weinstein claims that plaintiff Trimble has

filed a defective certificate of merit and that his claims should

be dismissed on that ground. Pennsylvania Rule of Civil

Procedure 1042.3 requires the filing of a certificate of merit

“[i]n any action based upon an allegation that a licensed

professional deviated from an accepted professional standard.” 

Pa. R. Civ. P. 1042.3(a). A separate certificate of merit must

be filed against each defendant. Pa. R. Civ. P. 1042.3(b). 

Plaintiff Trimble grouped defendant Weinstein and the Weinstein

Law Offices together with “John Does 1-10 (Bohmueller Partners).” 

The Court is satisfied with the validity of the certificate of

merit. The Court considers Weinstein and the “Weinstein Law

Offices” to be the same entity. The addition of the John Does

does not invalidate the certificate.

In addition, plaintiff Trimble alleges a second count

of professional negligence against all defendants. The

allegations are duplicative as to the attorney defendants. The

other defendants (the Insurance Company Group defendants, the

Patriot Group, and Spangler) are not licensed professionals under

Pa. R. Civ. P. 1042.1, and therefore the professional negligence

claim cannot be maintained. Gilmour v. Bohmueller, No. Civ. A.

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84

04-2535, 2005 WL 241181 (E.D. Pa. Jan. 27, 2005). The Court

dismisses this claim. 

8. Breach of Contract

The plaintiffs in the individual cases allege that they

entered into an agreement with the defendants whereby the

plaintiffs specifically instructed the defendants to provide

estate planning that would result in tax and estate benefits,

tax-free and otherwise beneficial investments, and living trusts

that would avoid probate. (Gilmour ¶ 273; Trimble ¶ 240; Trietz

¶ 270). The plaintiffs allege that the defendants breached those

agreements by failing to deliver the agreed-upon services and

that the plaintiffs suffered damages as a result. The Insurance

Company Group defendants, attorney defendants Weinstein and

Plaza, and the Patriot Group (as to Plaintiff Gilmour) move for

dismissal. They contend that there is no such contract and that

the plaintiffs’ allegations are too vague to constitute essential

terms.

Under Pennsylvania law, a claim for breach of contract

must allege the following three elements: “(1) the existence of a

contract, including its essential terms, (2) a breach of a duty

imposed by the contract, and (3) resultant damages.” Omicron

Sys., Inc. V. Weiner, 860 A.2d 554, 564 (Pa. Super. Ct. 2004)

(citation omitted). An enforceable contract exists where the

parties reached a mutual agreement, exchanged consideration, and

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 In his reply brief Plaintiff Trimble names Mr. Strope as the 18

agent for Weinstein and Spangler as the agent for the Insurance

Group defendants. This information does not appear in Trimble’s

amended complaint, however, and the Court will not take notice of

it.

85

set forth the terms of their bargain with sufficient clarity. 

See Biddle v. Johnsonbaugh, 664 A.2d 159, 163 (Pa. Super. Ct.

1995) (citation omitted). 

The Trimble and Treitz complaints fail to state the

specific identities of the defendants who entered into the

contracts. Gilmour does allege that the Sales Agent Group 18

defendants acted as contracting agents for Bohmueller and the

Insurance Group Company defendants, but all the plaintiffs fail

to specify what consideration supported the contract and what the

plaintiffs’ duties were under the contract. The plaintiffs’

allegations restate the basic wrongs laid out in the rest of the

complaints but do not specifically plead the contract’s essential

terms, as required in CoreStates, 723 A.2d at 1058. This is

insufficient to establish the existence of the contract. 

Therefore, the plaintiffs’ breach of contract claims

are insufficient to establish a cause of action against any of

the defendants, and the defendants’ motions to dismiss these

claims are granted. 

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9. Violation of the Pennsylvania Unfair Trade

Practices and Consumer Protection Law 

The plaintiffs claim that all of the defendants

violated the Pennsylvania Unfair Trade Practices and Consumer

Protection Law (“UTPCPL” or “Consumer Protection Law”) in

performing estate, asset, and tax services for the plaintiffs in

a deceptive manner likely to cause consumer confusion. (Gilmour,

¶¶ 285-90; Trimble, ¶¶ 251-56; Treitz, ¶¶ 276-81); 73 Pa. Cons.

Stat. § 201-2(4). The plaintiffs also allege that the Sales

Group engaged in the unauthorized practice of law, in violation

of 42 Pa. Cons. Stat. Ann. § 2524 and the UTPCPL, and that the

Insurance Company Group and Attorney Group aided and abetted the

Sales Group in this unauthorized practice of law. (Gilmour, ¶¶

291-92; Trimble, ¶¶ 257-58; Treitz, ¶¶ 282-83). 

The defendants argue that to state a claim under the

UTPCPL, the plaintiffs must plead and prove the elements of

common law fraud. The cases the defendants cite rest on

Pennsylvania case law that predated a 1996 amendment to the

UTPCPL, changing “any other fraudulent conduct” to “any other

fraudulent or deceptive conduct.” 73 Pa. Cons. Stat. § 201-2. 

Since that amendment, the Pennsylvania Supreme Court has not

ruled on whether plaintiffs must still plead and prove all the

elements of common law fraud. The Court, however, need not rule

at this point in the proceedings on the exact requirements for

stating a claim under the UTPCPL. The Court concluded above that

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87

the complaints state a claim for fraudulent misrepresentation and

civil conspiracy. The plaintiffs’ main theory for violation of

the UTPCPL is similar to conspiracy and fraudulent

misrepresentation. The Court also will not dismiss the UTPCPL

claims for lack of a pleading of reliance. Although not fulsome,

the plaintiffs’ pleadings sufficiently allege reliance.

Because the Court found that the complaints state a

claim for violation of the UTPCPL under one of the plaintiffs’

theories, the Court will not at this time rule on the validity of

the plaintiffs’ other theories for UTPCPL liability. 

10. Negligence Per Se

The plaintiffs claim that the defendants’ use of nonattorney sales agents to solicit the plaintiffs to purchase

living trusts and deferred annuities constitutes the unauthorized

practice of law, in violation of Pennsylvania law. They further

allege that such violation gives rise to a claim of negligence

per se. The Insurance Company Group defendants and defendants

Weinstein and Plaza argue that the negligence per se claim has

not been adequately asserted. The Court considers negligence per

se to be a method of proving certain elements of a negligence

claim (i.e., duty and breach of the duty) rather than a distinct

cause of action. The plaintiffs have not made a negligence

claim, so negligence per se is inapplicable. The Court therefore

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88

dismisses the plaintiffs’ negligence per se claims against all

defendants. 

11. An Accounting

The plaintiffs in the individual actions have alleged

causes of action for an accounting. The Insurance Company Group

defendants and Weinstein and Plaza have moved to dismiss on the

ground that an accounting is not a cause of action, but a remedy. 

The Court agrees and will dismiss the accounting count in the

three complaints. The Court expresses no view as to whether some

or all of the information sought in the accounting count would be

available through discovery or whether some form of an accounting

would be an appropriate remedy in this case if the plaintiffs are

able to establish liability.

An appropriate Order follows.

Case 2:05-md-01712-MAM Document 207 Filed 08/30/07 Page 92 of 96
IN THE UNITED STATES DISTRICT COURT

FOR THE EASTERN DISTRICT OF PENNSYLVANIA

IN RE: AMERICAN INVESTORS :

LIFE INSURANCE CO. ANNUITY : MDL DOCKET NO. 1712

MARKETING AND SALES PRACTICES :

LITIGATION :

:

Relates to: :

:

GILMOUR v. BOHMUELLER, et al. :

CIVIL ACTION NO. 04-2535 :

:

TRIMBLE v. WEINSTEIN, et al. :

CIVIL ACTION NO. 05-2101 :

:

BRENNAN v. WEINSTEIN, et al. :

CIVIL ACTION NO. 05-3588

ORDER

AND NOW, this 29 day of August, 2007, upon th

consideration of the following motions:

A. Motion to Dismiss Amended Complaints in

Trimble and Brennan Actions filed by

defendants Brett Weinstein, Esquire, and

Jason A. Plaza, Esquire (Docket No. 108 in

MDL-1712; Docket No. 63 in Civil Action No.

05-2101);

B. Motion to Dismiss Fourth Amended Complaint

filed by Plaintiff Gilmour of defendants

AmerUs Group Co., AmerUs Annuity Group Co.,

American Investors Life Insurance Company,

Creative Marketing International Corp., and

American Investors Sales Group Co. (Docket

No. 111 in MDL-1712; Docket No. 173 in Civil

Action No. 04-2535);

C. Motion to Dismiss First Amended Complaint

filed by Plaintiffs Treitz and Brennan of

defendants AmerUs Group Co., AmerUs Annuity

Group Co., American Investors Life Insurance

Company, and Creative Marketing International

Case 2:05-md-01712-MAM Document 207 Filed 08/30/07 Page 93 of 96
2

Corp. (Docket No. 112 in MDL-1712; Docket No.

53 in Civil Action No. 05-3588);

D. Motion to Dismiss Consolidated Amended Class

Complaint of defendants AmerUs Group Company,

AmerUs Annuity Group Company, American

Investors Life Insurance Company, Creative

Marketing International Corporation, and

Insurance Agency Marketing Services, Inc.

(Docket No. 113 in MDL-1712);

E. Motion for Judgment on the Pleadings as to

Trimble’s First Amended Complaint of

defendants AmerUs Group Co., AmerUs Annuity

Group Co., American Investors Life Insurance

Company, Inc., and Creative Marketing

International Corp. (Docket No. 123 in MDL1712; Docket No. 67 in Civil Action No. 05-

2101);

F. Motion to Dismiss Plaintiff’s Amended

Complaint of defendants Brian J. Newmark,

Estate Planning Advisors Corp., Victoria

Larson, Diane Strope, Mary Chiavaroli, and

Kenneth Krygowski (Docket No. 133 in MDL1712; Docket No. 56 in Civil Action No. 05-

3588);

G. Motion to Dismiss Counts I, II and VII of the

Fourth Amended Complaint filed by defendant

The Patriot Group, Inc. (Docket No. 167 in

Civil Action No. 04-2535);

H. Motion to Dismiss Fourth Amended Complaint

filed by defendant Bohmueller (Docket No. 172

in Civil Action No. 04-2535);

I. Motion to Dismiss First Amended Complaint

filed by defendant Bohmueller (Docket No. 64

in Civil Action No. 05-2101); 

J. Motion to Dismiss Amended Complaint of

defendants Brett Weinstein, Esquire, and

Jason A. Plaza, Esquire (Docket No. 51 in

Civil Action No. 05-3588); and

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3

K. Motion to Dismiss First Amended Complaint

filed by defendant Bohmueller (Docket No. 52

in Civil Action No. 05-3588);

and upon consideration of the oppositions to the motions and

after oral argument held on March 30, 2007, IT IS HEREBY ORDERED

that said motions are granted in part and denied in part for the

reasons stated in a memorandum of today’s date as follows:

1. The motions of AmerUs Group

Company, Brian Newmark, Mary Chiavaroli, and Diane

Strope are granted in their entirety.

2. The motions of AmerUs Annuity Group

Co., American Investors Life Insurance Co.,

American Investors Sales Group, Creative Marketing

International Corporation, and Insurance Agency

Marketing Services, Inc., are granted as to the

RICO claims of Jean Ryles, George Miller, Edward

and Gloria Inferrera, and Evelyn Edwards, and as

to the claims of negligent supervision, unjust

enrichment in the individual actions, breach of

contract, professional negligence, negligence per

se, and an accounting. In all other respects,

their motions are denied.

3. The motion of The Patriot Group is

granted as to the claims of breach of contract, 

negligence per se, professional negligence, and an

accounting. In all other respects, its motion is

denied.

4. The motions of Barry Bohmueller are

granted as to negligence per se, breach of

contract, and an accounting. In all other

respects, his motions are denied.

5. The motions of Brett Weinstein and

Jason Plaza are granted as to negligent

supervision, breach of contract, negligence per

se, and an accounting. In all other respects,

their motions are denied.

6. The motion of Estate Planning

Advisors Corp., Victoria Larson, and Kenneth

Krygowski is granted as to unjust enrichment,

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4

breach of contract, negligence per se, and an

accounting. In all other respects, their motion

is denied.

7. The professional negligence claim

is also dismissed as to Ralph Spangler.

8. The breach of contract, negligence

per se, and accounting claims are dismissed as to

all the defendants.

BY THE COURT:

/s/ Mary A. McLaughlin___

MARY A. McLAUGHLIN, J.

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